Bloomberg News

Taiwan Dollar Weakens on Rate-Pause Speculation; Bonds Decline

September 29, 2011

Sept. 29 (Bloomberg) -- Taiwan’s dollar weakened on speculation the central bank will leave borrowing costs unchanged today as Europe’s debt crisis threatens to derail the global economic recovery. Government bonds declined.

The monetary authority will keep the discount rate on 10- day loans at 1.875 percent in a decision expected around 4:30 p.m. local time, according to 14 of 17 economists surveyed by Bloomberg. The rest forecast a 0.125 percentage point increase. The European Commission is resisting a push to impose bigger writedowns on bank holdings of Greek sovereign debt than those previously agreed on, a European official said.

“Investors are pretty much not expecting a rate rise today,” said George Pu, a Taipei-based bond trader at President Securities Corp. “Uncertainties over the global economic recovery will be the main factor affecting Taiwan bond yields.”

Taiwan’s dollar retreated 0.1 percent to NT$30.44 against its U.S. counterpart as of the 4 p.m. local close, according to Taipei Forex Inc. The currency has weakened 4.7 percent this month and 5.6 percent this quarter.

The yield on the 1.25 percent notes due September 2021 rose two basis points to 1.30 percent as of the 1:30 p.m. close in Taipei, prices from Gretai Securities Market show. Benchmark 10- year yields have dropped 13 basis points in September and 21 basis points, or 0.21 percentage point, this quarter.

The overnight money-market rate, which measures interbank funding availability, was 0.398 percent from 0.394 percent yesterday, according to a weighted average compiled by the Taiwan Interbank Money Center.

--Editors: Andrew Janes, Ven Ram

To contact the reporter on this story: Andrea Wong in Taipei at awong268@bloomberg.net

To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net


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