The New Taiwan dollar fell after leaders of the G20 failed to agree on specific measures to tackle a global credit crisis, prompting overseas investors to shun riskier assets. Bonds advanced.
Eight of Asia’s 10 most-active currencies excluding the yen weakened against the greenback yesterday after government reports showed Japan and Hong Kong slipped into a recession, joining the US and Europe. Global funds sold more Taiwan shares than they bought in four of the past five days, reducing their holdings by a net NT$16.4 billion (US$495 million), stock exchange data showed.
“The underlying sentiment still basically points to more currency weakness in Asia versus the dollar,” said Christy Tan, a currency strategist at Bank of America Corp in Singapore.
The G20 meeting “did not help appease or lead to any improvement in sentiment. Until we see some stabilization return to equity markets, we expect the currencies to continue to fall,” Tan said.
The NT declined 0.3 percent to NT$33.17 against the greenback as of the 4pm close, Taipei Forex Inc said. It reached NT$33.192 on Thursday last week, the weakest level this month.
The G20 urged a “broader policy response” and set a March deadline for recommendations on improving regulations at a summit that ended in Washington on Saturday.
Taiwan’s 10-year bonds rose for a sixth day, before a government report this week that may show the nation’s economy grew at the slowest pace in more than five years.
Ten-year bond yields closed at the lowest level since July 2003. GDP expanded 0.8 percent in the third quarter from a year earlier, according to the median estimate in a Bloomberg survey before the statistics bureau reports the data this Thursday. That would be the smallest increase since the three months ended June 2003.
“There are some new buyers coming to the market,” said Rick Chen, a debt trader at Taiwan Securities Co (台證證券) in Taipei. “The economy is in bad shape, and inflation will be easing next year, prompting investors to be bullish on bonds.”
Consumer prices climbed 2.39 percent last month from a year earlier, the least in 14 months, the statistics bureau said on Nov. 5.
The central bank on Sunday last week cut interest rates for the fourth time in two months, taking advantage of slowing inflation to help spur spending in Taiwan.
The yield on the benchmark 2.125 percent bond maturing September 2018 fell 5 basis points to 1.66 percent as of the 1:30pm close in Taipei, said GRETAI Securities Market, Taiwan’s biggest exchange for bonds.
Its price climbed 0.4246, or NT$424.6 per NT$100,000 face amount, to 104.1566. A basis point is 0.01 percentage point.
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