Bloomberg News

Taiwan Dollar Completes Longest Weekly Losing Streak Since 2008

June 08, 2012

Taiwan’s dollar completed its longest weekly losing streak since September 2008 and government bonds gained on concern a slowing global economy is crimping demand for the island’s goods.

The currency retreated for a fifth straight week after government data showed yesterday exports dropped 6.3 percent in May from a year earlier, a third month of contraction. China, Taiwan’s biggest trade partner, cut interest rates for the first time in more than three years yesterday as economists predicted that official data this week will show growth in industrial production slowed last month to the least since November 2009.

“China’s rate cut is a sign of a bleaker economic outlook,” said Albert Lee, a Taipei-based fixed-income trader at Cathay United Bank Co. “The current environment will support a rally in bonds.”

Taiwan’s dollar retreated 0.2 percent this week and today to NT$29.976 against its U.S. counterpart, according to Taipei Forex Inc. It touched NT$30.070 on June 5, the weakest level since Jan. 17.

The currency’s one-month implied volatility, a measure of exchange-rate swings traders use to price options, dropped two basis points to 5.33 percent. It fell 68 basis points for the week.

The yield on the government’s 1 percent bonds due January 2017 dropped one basis point this week and today to 0.922 percent, according to Gretai Securities Market. It reached 0.91 percent on June 4, the lowest level for benchmark five-year rates since October 2010.

Traders are shifting focus to longer-maturity debt, especially 10-year notes, on concern Greece elections next month will fan volatility, Lee said. The yield on Taiwan’s generic 10- year bonds fell one basis point today and two basis points this week to 1.17 percent.

The overnight interbank lending rate was steady today and for the week at 0.514 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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