Bloomberg News

Taiwan Dollar Ends Four-Day Drop, Bonds Fall on Inflation Worry

June 05, 2012

Taiwan’s dollar snapped a four-day decline and government bonds fell for the first time in a week after official data showed inflation accelerated more than economists estimated in May.

Consumer prices rose 1.74 percent from a year earlier, compared with an increase of 1.44 percent in April and the median forecast of 1.4 percent by economists in a Bloomberg survey. The U.S. dollar’s 14-day relative-strength index against the local currency reached 80.4 yesterday, exceeding the threshold of 70 that signals the greenback will reverse gains. Global funds sold $439 million more of the island’s stocks than they bought in June on concern an escalating European debt crisis is hurting Taiwan’s economy.

“Some exporters sold the greenback as they see the rally is kind of over for now,” said Tarsicio Tong, a foreign- exchange trader at Union Bank of Taiwan (2838) in Taipei. “The central bank might keep the Taiwan dollar stable to strike a balance between inflation risk and slowing growth.”

Taiwan’s dollar strengthened 0.2 percent to NT$30 against its U.S. counterpart, according to Taipei Forex Inc. It touched NT$30.07 earlier, the weakest level since Jan. 17. One-month implied volatility, a measure of exchange-rate swings traders use to price options, fell 25 basis points to 5.81 percent.

Exports slumped 5.3 percent in May from a year earlier, a third month of contraction, analysts estimated before official data due on June 7.

The yield on the government’s 1 percent bonds due January 2017 rose one basis point, or 0.01 percentage point, to 0.927 percent, according to Gretai Securities Market. It reached 0.909 percent yesterday, the lowest level for benchmark five-year rates since Oct. 26, 2010.

The overnight interbank lending rate was little changed at 0.509 percent, according to a weighted average compiled by the Taiwan Interbank Money Center.

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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