Taiwan Dollar Volatility Drops to 16-Month Low as Won Gains Slow

A gauge of expected swings in Taiwan’s dollar fell to the lowest level since January 2013 on speculation the central bank will be less inclined to intervene to keep exports competitive with South Korea.

The island’s dollar climbed 0.3 percent this month, compared with a 1 percent advance in the Korean won, data compiled by Bloomberg show. The currencies’ posted respective gains in April of 0.8 percent and 3.1 percent. Global funds bought $852 million more Taiwanese shares they sold this month, down from $3.1 billion in April and $2.5 billion in March, exchange data show. That didn’t prevent the Taiex index of shares from jumping 3 percent in May to a three-year high today.

“The won seems to be stabilizing after rising for a while, and the yuan is continuing to fall, so there are no conditions for the Taiwan dollar to appreciate further,” said Samson Tu, a Taipei-based fund manager at Uni-President Assets Management Corp. “Taiwan’s stocks have risen, but equity inflows haven’t been that strong.”

One-month implied volatility in the Taiwan dollar, a measure of exchange-rate moves used to price options, fell seven basis points to 3.03 percent as of 4:28 p.m. in Taipei, data compiled by Bloomberg show. The gauge earlier touched 2.97 percent, the lowest level since Jan. 28, 2013.

Taiwanese and South Korean companies such as HTC Corp. and Samsung Electronics Co. compete in overseas markets. A stronger currency tends to erode their price competitiveness abroad.

In the spot market, the currency was little changed at NT$30.171 against its U.S. counterpart, according to prices from Taipei Forex Inc. One-month non-deliverable forwards fell 0.1 percent to NT$30.130, data compiled by Bloomberg show.

While the currency may be supported by exporters’ month-end dollar sales, it will trade in a tight range this week, Tu said.

The yield on the government’s 1 percent bonds due in February 2019 was little changed at 1.04 percent, prices from GreTai Securities Market show.

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