Taiwan Dollar Erases Loss as Won Rebounds From Korea Rate Cut

Taiwan’s dollar erased an earlier decline as South Korea’s won recouped losses after a surprise rate cut.

The Bank of Korea reduced its key rate by 25 basis points to a record low 1.75 percent on Thursday, stoking speculation Taiwan may weaken its currency to aid its exporters. The won, which often moves in tandem with the Taiwan dollar as the two economies are export rivals, slid as much as 0.8 percent after the announcement.

The island’s dollar closed little changed at NT$31.670 against the greenback, Taipei Forex Inc. prices show. It fell as much as 0.3 percent to NT$31.775 earlier, the weakest since Jan. 16. Taiwan’s currency has appreciated 1.2 percent versus the won over the past month and 1.6 percent against the yen.

“There was speculation earlier that because Taiwan’s dollar lags the won in depreciating, it needs to catch up and fall more quickly,” said Tarsicio Tong, a currency trader at Union Bank of Taipei in the city. “Now it looks like it won’t be that severe.”

One-month non-deliverable forwards advanced 0.3 percent to NT$31.615, after falling 0.5 percent over the previous two days, according to data compiled by Bloomberg.

Taiwan’s central bank Governor Perng Fai-nan told lawmakers Thursday that the island doesn’t have to follow U.S. monetary policy, which he expects could raise rates as early as June. The central bank will “smooth out” currency volatility as a result of hot-money flows, he said.

Sovereign bonds gained, pushing the yield on the notes due 2025 down one basis point, or 0.01 percentage point, to 1.610 percent, Taipei Exchange prices show.

Before it's here, it's on the Bloomberg Terminal.