Taiwan Dollar Forwards Rise Most in Three Weeks on Fed RatesJustina Lee
Forwards on the Taiwan dollar rose by the most in three weeks on prospects the island’s stock market will attract more overseas money after the Federal Reserve pledged to keep interest rates low.
The Taiex index of shares closed at the highest level since November 2007 after Fed Chair Janet Yellen said yesterday that borrowing costs are likely to stay low “for a considerable time.” The European Central Bank has cut its deposit rate to negative, helping pull a net $6.3 billion into Taiwanese equities this quarter, exchange data show.
“As Taiwan’s stocks rise, there’s more money coming in,” said Tarsicio Tong, a Taipei-based currency trader at Union Bank of Taiwan. “With the U.S. maintaining its interest rate and Europe cutting rates, investors looking for high yields are going into Asia.”
One-month non-deliverable forwards climbed 0.2 percent to NT$29.964 against the greenback as of 4:25 p.m. in Taipei, according to data compiled by Bloomberg. That’s the biggest advance since May 29. In the spot market, the currency appreciated 0.1 percent to NT$30.036, prices from Taipei Forex Inc. show.
One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, fell six basis points, or 0.06 percentage point, to 2.74 percent.
Taiwan reports figures for export orders tomorrow, with economists forecasting a 7.2 percent increase from a year earlier in May, after rising 8.9 percent the previous month, according to the median estimate in a Bloomberg News survey.
Sovereign bonds rose for the first time in three days, with the yield on the 1.5 percent notes due March 2024 falling six basis points to 1.594 percent, according to prices from GreTai Securities Market. That’s the biggest slide for a benchmark of that maturity since September 2011.
“There were no unexpected major messages from the Fed meeting,” said Jerry Lin, a Taipei-based bond trader at First Commercial Bank. “With Treasury yields falling back down, there were large buy orders for Taiwan’s 10-year bonds from end users at the 1.6 percent to 1.62 percent range.”
Similar-maturity Treasury yields slid seven basis points yesterday. Taiwan’s 10-year bond yield jumped 11 basis points in the last two days to the highest level in almost five months.