Taiwan Dollar Volatility Rises to Seven-Month High on Yen Slide

A gauge of expected swings in Taiwan’s dollar climbed to the highest since March on speculation the currency will weaken further following declines in South Korea’s won and the Japanese yen.

The yen dropped beyond 115 per U.S. dollar today for the first time since 2007, while the won has plunged 2.6 percent and Taiwan’s dollar 0.7 percent since Oct. 30, the day before the Bank of Japan unexpectedly expanded monetary stimulus that boosts the supply of the Japanese currency. Taiwan’s electronics exporters including HTC Corp., a smartphone maker, compete against the likes of Samsung Electronics Co. in South Korea and Sony Corp. in Japan.

“Everyone thinks Taiwan’s dollar is going to have to follow the won and the yen,” said Forest Chen, an economist at Ta Chong Bank Ltd. in Taipei. “Taiwan’s dollar has only depreciated less than half as much as Korea’s won has, so there’s room to fall further. You’ll need to see when the yen stabilizes.”

One-month implied volatility for Taiwan’s currency, a gauge of expected fluctuations in the exchange rate used to price options, jumped 10 basis points, or 0.1 percentage point, to 3.68 percent as of 4:42 p.m. in Taipei, data compiled by Bloomberg show. The measure earlier climbed to 3.90 percent, the highest level since March 26.

Regular Intervention

Taiwan’s dollar was little changed at NT$30.605 against its U.S. counterpart, after slipping 0.2 percent in the last 28 minutes of trading amid suspected central bank intervention, prices from Taipei Forex Inc. show. 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 0.2 percent today to NT$30.555.

Any decline in the currency may be limited by stock inflows, Ta Chong Bank’s Chen added. Foreign investors bought $605 million more of Taiwan’s stocks than they sold in the last three days, after recording $1.44 billion of net inflows last week, exchange data show.

In the bond market, the yield on Taiwan’s 1.25 percent sovereign notes due October 2019 was little changed at 1.162 percent, GreTai Securities Market prices show.

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