Taiwan dollar falls as yield gap spurs outflows

Bloomberg

Sun, Dec 29, 2013 - Page 15

The New Taiwan dollar posted a third weekly loss on concern rising yields on US assets will lure funds away from local markets. Government bonds fell.

The yield on 10-year Treasuries touched a three-month high yesterday after the US Federal Reserve said last week it is to cut its debt purchases.

The premium on US notes over similar-maturity Taiwanese bonds widened to the most since July 2011 on Friday, after the nation’s central bank kept its benchmark interest rate unchanged for a 10th straight meeting yesterday.

The New Taiwan dollar weakened 0.2 percent this week to NT$30.025 against the greenback, prices from Taipei Forex Inc showed.

The currency strengthened 0.1 percent on Friday, snapping a 13-day losing streak that was the longest since 1996. It slipped 0.2 percent in the last three minutes of trading amid suspected central bank intervention.

The monetary authority will step into the foreign-exchange market in the event of any irregularities, Governor Perng Fai-nan (彭淮南) said on Friday.

The central bank has sold the local dollar in the run-up to the close on most days since March last year, according to traders who asked not to be identified.

ASIAN CURRENCIES

Most Asian currencies fell this week as signs of an improving US economy bolstered demand for the US dollar amid tapering from the Federal Reserve that is spurring outflows from emerging markets.

Global funds pulled US$3.6 billion from South Korean, Thai, Philippine and Indonesian stocks so far this month as the Fed prepares to pare stimulus next month, exchange data showed.

The Thai baht led losses this week as the two-month-long political protests escalated, raising concerns about economic growth and tourism.

Trading was muted due to closures in many markets for the Christmas holidays, according to Malayan Banking Bhd.

The baht depreciated 0.8 percent from Dec. 20 to 32.873 per US dollar in Bangkok, having touched 32.882, the weakest level since February 2010, according to data compiled by Bloomberg.

Indonesia’s rupiah fell 0.4 percent to 12,263 before touching a five-year low of 12,281.

The rupiah is leading the year’s declines among Asian currencies, having fallen 21.4 percent as investors anticipated a cut in US stimulus.

The Indian rupee slumped 11.1 percent, the Philippine peso dropped 7.5 percent and Malaysia’s ringgit 7 percent, according to data compiled by Bloomberg.

BAHT

The baht fell for a second week and is down 7 percent this year, headed for its worst annual performance since 2000.

The Thai Election Commission urged the government to delay a Feb. 2 poll after protesters tried to storm a Bangkok arena where candidates were registering, sparking a riot that killed one person and injured 128.

The baht’s drop has been “orderly,” as the market adjusts to the Fed’s stimulus reduction and the political unrest, Bank of Thailand spokeswoman Roong Mallikamas said on Monday.

South Korea’s won and the peso bucked the weakening trend. Trading is quiet this week and could remain that way through the New Year as most people are still away on holidays, Malayan Banking’s Supaat said.

The won strengthened 0.7 percent from Dec. 20 to 1,054.36 per dollar, following a decline of 0.8 percent last week, data compiled by Bloomberg showed.

It rallied 1.4 percent to 10.05 against the yen, rising for a seventh straight week.

This year, the won climbed 1 percent versus the US dollar, trailing a gain of 2.7 percent in the Chinese yuan, Asia’s best performance.

Elsewhere in Asia this week, India’s rupee increased 0.3 percent to 61.8450 per US dollar and the ringgit was little changed at 3.2877.

The Philippine peso gained 0.3 percent to 44.380 and Vietnam’s dong rose 0.1 percent to 21,095. China’s yuan traded at 6.0686, compared with 6.0713 on Dec. 20.

EURO

The euro rallied for the sixth time in seven weeks on optimism the region’s economy will continue to rebound from contractions last year and this year following the financial crisis.

The 17-nation currency gained as the current-account surplus widened to 21.8 billion euros (US$30 billion) in October, the highest since 1997, while a report on Thursday is forecast to confirm that eurozone factory output grew at a 31-month high this month.

The euro climbed 0.6 percent to US$1.3749 this week in New York, and reached 1.3893, the highest since October 2011.

The euro rallied 1.6 percent to ¥144.59, a seventh straight week of gains, while the Japanese currency fell 1 percent to ¥105.17 per US dollar, its ninth weekly drop, the longest streak since February.

The Swiss franc’s 1.7 percent gain against the greenback led its 16 major peers this month, while South Africa’s rand declined 3.4 percent, the biggest loser.

The currency of Africa’s largest economy was also the worst performer this year, having lost 19.5 percent.

The euro and Danish krone were the biggest winners, having rallied 4.2 percent.

REAL

The real was the best performer among major currencies this week after the central bank on Dec. 18 said it will extend its intervention announced in August to support the currency and limit import price increases.

Brazil is to auction US$200 million of foreign-exchange swaps on trading days from next month through at least the end of June, down from offerings of US$500 million four days a week this year.

The currency surged 2.1 percent to 2.3383 per US dollar this week, the biggest five-day advance in three months.

The lira tumbled for a fifth week amid a showdown between the government and judicial powers.

Turkey’s currency slumped 3 percent from the end of last week to 2.1549 per dollar after dropping to an all-time low 2.1764.