Taiwan Dollar Completes Fifth Weekly Decline on Outflows

Taiwan’s dollar dropped for a fifth week in the longest run of declines since January, after overseas investors pulled funds from local stocks in preparation for higher U.S. interest rates.

Global funds sold $866 million more Taiwanese equities than they bought this week, exchange data show, adding to net sales of $1.8 billion over the previous three weeks. The Bloomberg Dollar Spot Index, which tracks the greenback against 10 major peers, has risen 1.6 percent since the Federal Open Market Committee boosted its end-2015 median estimate for the federal funds rate by 25 basis points at its Sept. 16-17 meeting.

The Taiwanese dollar fell 0.4 percent this week to NT$30.437 against its U.S. counterpart, prices from Taipei Forex Inc. show. The currency, which rose 0.1 percent today, has fallen 1.5 percent since the end of August. One-month non-deliverable forwards dropped 0.35 percent this week and 0.1 percent today to NT$30.446 per U.S. dollar, according to data compiled by Bloomberg.

“Foreign investors are still cutting holdings of Taiwan’s stocks,” said Forest Chen, a Taipei-based economist at Ta Chong Bank Ltd. “The issue of a U.S. rate increase hasn’t cooled down. But it’s unlikely the Taiwan dollar will depreciate further. The situation will become clearer when the FOMC releases its minutes next week.”

The minutes will be released Oct. 8. Rising interest rates in the U.S. will reduce the appeal of emerging-market assets.

One-month implied volatility, a gauge of expected swings in the exchange rate used to price options, jumped 45 basis points, or 0.45 percentage point, this week to 3.52 percent. The measure slipped 12 basis points today.

Taiwan’s government bonds advanced this week, with the yield on the 1.25 percent notes due October 2019 dropping six basis points to 1.279 percent, GreTai Securities Market prices show. That’s the biggest weekly decrease for a benchmark of that maturity since October 2013. The yield fell one basis point today.

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