Bloomberg News

Taiwan Dollar Has Weekly Loss on Slowdown Concerns; Bonds Drop

May 25, 2012

Taiwan’s dollar dropped for a third week on concern waning demand for the island’s exports from China and Europe will cool economic growth. Government bonds declined.

The local currency fell for a third day ahead of official data due today that economists surveyed by Bloomberg predict will show the economy expanded 0.4 percent in the first quarter from a year earlier, versus a 0.36 percent estimate released on April 30. Gross domestic product increased 1.89 percent in the final three months of 2011. Official reports this month showed exports and industrial production contracted in April, while inflation accelerated to 1.44 percent.

“The authorities will have to keep the currency weak to support exporters until we see signs of improvement in the second half,” said Jackit Wong, a regional economist in Hong Kong at Natixis Asia Ltd. “Data are pointing to the downside, while inflation is still among the lowest in the region.”

The Taiwan dollar fell 0.1 percent to NT$29.65 against its U.S. counterpart this week, according to Taipei Forex Inc. It was little changed today. One-month implied volatility for the currency, a measure of exchange-rate swings that traders use to price options, dropped 31 basis points to 5.75 percent this week and rose 15 basis points today.

Overseas investors sold $493 million more of the island’s stocks than they bought this week through yesterday, taking net sales this month to $3.3 billion, according to exchange data.

Chinese Manufacturing

Manufacturing in China, Taiwan’s biggest overseas market, probably contracted for a seventh month in May, according to a preliminary report from HSBC Holdings Plc and Markit Economics yesterday. The island’s exports fell 6.4 percent in April from a year earlier, while factory output shrank 2.33 percent.

The statistics bureau cut its 2012 growth forecast on April 30 to 3.38 percent from 3.85 percent and lifted the inflation target to 1.94 percent from 1.46 percent.

The yield on the 1 percent government bonds due January 2017 increased one basis point, or 0.01 percentage point, to 0.966 percent from a week ago, according to Gretai Securities Market. The rate was steady today. The overnight interbank lending rate was unchanged this week at 0.511 percent, according to a weighted average compiled by the Taiwan Interbank Money Center.

To contact the reporter on this story: David Yong in Singapore at dyong@bloomberg.net

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


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