Taiwan Dollar Volatility Falls Most Since July on Stock Outflows

A gauge of expected fluctuations in Taiwan’s dollar dropped by the most in seven months this week, a sign the currency may be stabilizing after falling 2.4 percent in three months.

One-month implied volatility, a measure used to price options, slid 50 basis points this week and six basis points today to 3.54 percent as of 4:27 p.m. in Taipei, data compiled by Bloomberg show. That’s the biggest decline since the five days ended July 5.

Global funds have sold $1.3 billion more Taiwanese equities than they bought this year, exchange data show. That compares with $9.2 billion of inflows for the whole of 2013. Taiwan’s dollar has weakened the most among Asia’s 11 most-traded currencies this year as the Federal Reserve cut its stimulus.

“Taiwan’s dollar may be stabilizing at a relatively weak level,” said Samson Tu, a Taipei-based fund manager at Uni-President Assets Management Corp. “Fund inflows are slowing, which reflects the general trend of capital exiting emerging markets.”

Taiwan’s dollar strengthened 0.2 percent this week and today to NT$30.347 against its U.S. counterpart, according to prices from Taipei Forex Inc. The currency slipped 0.2 percent in the last 17 minutes of trading amid suspected central bank intervention. The monetary authority has sold the local dollar in the run-up to the close on most days since March 2012, according to traders who asked not to be identified.

One-month non-deliverable forwards rose 0.1 percent this week and today to NT$30.245 against the greenback, data compiled by Bloomberg show.

Bonds Advance

The yield on the 1.625 percent sovereign bonds due March 2024 fell eight basis points this week and three basis points, or 0.03 percentage point, today to 1.57 percent in when-issued trading, prices from Gretai Securities Market show. That’s the lowest rate for 10-year government notes since Aug. 13.

“End-users, such as insurance companies, are buying more bonds now,” said Aaron Chien, a Taipei-based fixed-income trader at Taishin International Bank. “But you need to monitor whether the low yields can be sustained.”

The overnight interbank lending rate was steady this week and today at 0.387 percent, a weighted average compiled by the Taiwan Interbank Money Center showed.

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