Taiwan Dollar Closes at Two-Year Low as More Intervention Seen

Taiwan’s dollar closed at the weakest level in more than two years on speculation the Federal Reserve will continue to pare its stimulus and the island’s central bank will step up intervention to safeguard exports.

Reports this week will show continuing jobless claims in the U.S. fell and existing home sales climbed, according to median estimates in Bloomberg surveys. Fed officials will reduce asset purchases by another $10 billion on Jan. 28-29 and at each subsequent meeting this year, another Bloomberg survey shows. The won also fell today, slumping to a two-month low. Taiwanese electronics makers including HTC Corp. compete with regional rivals such as South Korea’s Samsung Electronics Co.

“The Fed is expected to cut its stimulus by $10 billion at this month’s meeting, which will drive appreciation in the U.S. dollar,” said Samson Tu, a Taipei-based fund manager at Uni-President Assets Management Corp. “As the won falls, there’s speculation Taiwan’s central bank will block gains in the Taiwan dollar.”

The island’s dollar declined for a fourth day, weakening 0.3 percent to NT$30.41 against the greenback, according to prices from Taipei Forex Inc. That’s the biggest drop since Jan. 6 and the weakest closing level since Nov. 29, 2011.

Taiwan’s central bank has sold the currency in the run-up to the close on most days since March 2012, according to traders who asked not to be identified. The spot rate has slipped an average of 0.5 percent in the last half hour of trading this week.

Forwards, Bonds

Taiwan’s industrial production rose 5.07 percent in December from a year earlier, data showed today. That was the biggest increase since January 2013 and topped all estimates in a Bloomberg survey.

One-month non-deliverable forwards fell 0.2 percent to NT$30.236 per dollar, according to data compiled by Bloomberg. The contracts touched 30.272 earlier, the weakest in two years.

One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, increased eight basis points, or 0.08 percentage point, to 3.86 percent.

The yield on the 1.125 percent government bonds due February 2019 was little changed at 1.14 percent, according to Gretai Securities Market. Taiwan will sell NT$30 billion ($989 million) of 20-year notes at 2.08 percent tomorrow, according to median estimate of 11 fixed-income traders.

The overnight interbank lending rate was steady at 0.386 percent, a weighted average compiled by the Taiwan Interbank Money Center showed.

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