Tue, Sep 30, 2014 - Page 13 News List

US growth drives NT dollar’s steepest fall this year

SPECULATION:While the recovering US economy could drive its interest rates up next year, the outflows from Taiwan’s stock market are making growth difficult

Bloomberg

The New Taiwan dollar declined the most in nine months yesterday after data showing that the fastest US economic growth since 2011 strengthened demand for the greenback.

The Bloomberg Dollar Spot Index climbed for a seventh day after the US reported a 4.6 percent expansion for the three months through June.

The gauge’s 6.5 percent jump this quarter would be the biggest in six years and comes as the improving US economy fuels speculation that the US Federal Reserve will raise interest rates next year.

On the TAIEX, global funds have been net sellers on each of the past 13 days, pulling US$2.17 billion out in that time, exchange data show.

“The US dollar is strong and the Taiwan dollar is following the international trend downward,” said Tarsicio Tong (湯健揚), a Taipei-based currency trader at Union Bank of Taiwan (聯邦銀行).

“There have also been continuous outflows from Taiwan’s stock market,” Tong said.

The NT dollar depreciated 0.6 percent — the most since Jan. 6 — to NT$30.502 against its US counterpart, prices from Taipei Forex Inc show.

The currency earlier in the session fell to NT$30.520, the weakest level since March 31.

One-month non-deliverable forwards dropped 0.6 percent to NT$30.507 on the day, according to data compiled by Bloomberg.

One-month implied volatility, a gauge of expected swings in the exchange rate used to price options, jumped 34 basis points — the most since March — to 3.40 percent. One basis point is equal to 0.01 percentage point.

In the bond market, the yield on Taiwan’s 1.25 percent government debt due on October 2019 fell one basis point to 1.334 percent in when-issued trading, GRETAI Securities Market prices show.

The Ministry of Finance sold NT$30 billion (US$984 million) of 20-year notes at 2.26 percent yesterday, the highest yield at auctions of same-tenor debt since May 2009.

That compared with the 2.3 percent median estimate in a Bloomberg News survey of 10 fixed-income traders.

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