Taiwan Dollar Forwards Set for Biggest Weekly Drop Since April

Forward contracts in Taiwan’s dollar are headed for their biggest weekly drop in three months as Asian currencies decline before U.S. data forecast to confirm a sustained recovery in the world’s largest economy.

The Bloomberg-JPMorgan Asia Dollar Index fell 0.2 percent this week. A report due today will show American employers added 230,000 workers in July and the jobless rate stayed at an almost six-year low of 6.1 percent, according to the median estimates of analysts surveyed by Bloomberg. The U.S. economy is recovering from a first-quarter contraction, fueling speculation the Federal Reserve will increase borrowing costs.

“Investors appear to be preparing for stronger-than-expected non-farm payrolls data,” said Frances Cheung, head of Asian rates strategy at Credit Agricole CIB in Hong Kong. “Worries of capital outflows are affecting Asian currency markets, including the Taiwanese dollar.”

One-month non-deliverable forwards on Taiwan’s dollar fell 0.4 percent this week to NT$30.062 versus the greenback as of 10:23 a.m. in Taipei, data compiled by Bloomberg show. That’s the biggest five-day loss since April 18. The contracts declined 0.1 percent today.

In the spot market, the local dollar was little changed today and this week at NT$30.027, prices from Taipei Forex Inc. show. One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, added eight basis points, or 0.08 percentage point, today to 2.52 percent.

Official data yesterday showed the island’s second-quarter gross domestic product increased 3.84 percent from a year earlier, beating the 3.2 percent median estimate in a Bloomberg survey. “The Taiwan dollar is relatively resilient on strong fundamentals,” Cheung said.

Government bonds gained for a fourth week, with the yield on the 1.125 percent notes due July 2019 dropping one basis point from July 25 to 1.172 percent, according to prices from GreTai Securities Market. It was little changed today.

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