The New Taiwan dollar fell to a five-week low as concern exports might slide further prompted foreign funds to dump Taiwanese stocks. Bonds dropped.
The currency extended two weeks of declines against the US dollar after overseas investors sold more local shares than they bought for each of the past 10 trading days, the longest streak since October, stock exchange data show. A report this week may show Taiwan’s export orders and industrial production both plunged by a record last month.
“The export numbers are already bad,” said Irene Cheung, a corporate director for local markets trading at ABN Amro Bank NV in Singapore. “Fundamentally, nothing has changed.”
The local currency closed at NT$33.535 against the US dollar, versus NT$33.501 on Saturday, according to Taipei Forex Inc. It earlier touched NT$33.537, the weakest since Dec. 10.
Orders, which are an indication of shipments in the next one to three months, fell an unprecedented 35.5 percent last month from a year earlier, economists said in a Bloomberg News survey before the report, which is to be issued on Friday. Industrial production dropped 32 percent, also a record, another survey forecast.
China may report this week that GDP rose 6.8 percent from a year earlier in the fourth quarter, the slowest pace in seven years, a separate Bloomberg survey showed. China’s imports from Taiwan fell 44.3 percent last month.
Taiwan’s overseas sales plunged a record 41.9 percent last month on weaker demand from the US and China for laptops, mobile phones and computer chips, the Ministry of Finance said on Jan. 7.
The inauguration of US president-elect Barack Obama may help boost investor risk appetite this week and support the NT dollar, Cheung said.
Taiwan’s 10-year bonds fell for a third day, after a sale last week showed that demand for government securities declined.
The Ministry of Finance’s auction of NT$40 billion (US$1.2 billion) of five-year notes on Friday attracted bids for 1.3 times the amount of debt on offer, lower than the 2.84 times at the previous auction of comparable debt on Oct. 24, a central bank statement showed.
Banks hesitated to bid on expectations the monetary authority may stop cutting interest rates this year, said Eric Hsing, a debt trader at First Taisec Securities Inc (一銀證券) in Taipei.
“The market reacted negatively to the bond auction result,” Hsing said. “There are risks in holding too many bonds.”
The yield on the 2.125 percent bond maturing in September 2018 climbed two basis points to 1.53 percent, according to the GRETAI Securities Market, Taiwan’s biggest exchange for bonds. Its price fell 0.173, or NT$173 per NT$100,000 face amount, to 105.328. A basis point is 0.01 percentage point.
Taiwan’s local-currency debt rating outlook was lowered to negative from stable by Fitch, which cited concern about the nation’s widening budget deficit.
The long-term local currency debt is rated AA at Fitch, the third-highest investment grade. Its foreign-currency rating is A+, the fifth-highest level.
“The improvements in Taiwan’s public finance in recent years are set to reverse course, with a growing general government deficit financed by local-currency borrowing,” the New York-based ratings company said in a statement yesterday.