Bloomberg News

Taiwan Dollar Completes Worst Week Since September; Bonds Rally

June 01, 2012

Taiwan’s dollar had its biggest weekly loss in eight months and government bonds rose as signs of a slowdown in Asia’s largest economy heightened concern Europe’s debt crisis is cooling global growth.

The currency touched a four-month low as data showed manufacturing in China, the island’s biggest export market, expanded last month at the slowest pace this year. Treasury yields reached record lows as investors favored dollar- denominated assets as a refuge from Europe’s financial crisis.

“China’s PMI adds to evidence that Europe’s debt crisis is bringing down Asia’s economy,” said George Pu, a bond trader at Sinopac Securities Corp. in Taipei. “Taiwan’s yields could go down even more if Treasury yields continue to hit record lows.”

Taiwan’s dollar fell 0.9 percent this week to NT$29.931 against its U.S. counterpart, the weakest level since Jan. 30, according to Taipei Forex Inc. One-month implied volatility, a measure of exchange-rate swings traders use to price options, rose 25 basis points this week and slipped three basis points today to 6 percent.

China’s Purchasing Managers’ Index fell to 50.4 in May from 53.3 in April. Global funds reduced holdings of local stocks by $3.9 billion in May, exchange data show, as reports showed the island’s industrial production dropped for a second month in April and the jobless rate increased.

The yield on the government’s 1 percent bonds due January 2017 fell four basis points, or 0.04 percentage point, this week to 0.930 percent, according to Gretai Securities Market. The yield declined one basis point today, touching 0.929 percent earlier, the lowest level since Feb. 7.

The overnight interbank lending rate was steady during the five-day period at 0.509 percent, according to a weighted average compiled by the Taiwan Interbank Money Center. It declined one basis point today.

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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