Bloomberg News

Taiwan Dollar Forwards Halt Four-Day Drop on China Manufacturing

October 24, 2012

Taiwan dollar forwards halted a four-day slide after a survey indicated a manufacturing slump is easing in China, the island’s largest export market.

The contracts reached a two-week low earlier as international funds sold $121 million more Taiwan stocks than they bought today, according to exchange data. The preliminary reading for China’s purchasing managers’ index released by HSBC Holdings Plc and Markit Economics today was 49.1, compared with a final reading of 47.9 last month. September’s result was the 11th straight month below 50, the dividing line between expansion and contraction.

“I expect the improvement in China’s flash PMI to add to the Taiwan dollar’s strength,” said Connie Tse, a regional economist at Forecast Pte in Singapore.

One-month non-deliverable forwards traded at NT$29.245 as of 4:08 p.m. in Taipei, compared with NT$29.25 yesterday, according to data compiled by Bloomberg. The contracts touched NT$29.29 earlier, the weakest level since Oct. 11, and are at a 0.3 percent premium to the spot rate.

In the spot market, the Taiwan dollar closed at NT$29.342 against its U.S. counterpart, compared with NT$29.328 yesterday, data from Taipei Forex Inc. showed. One-month implied volatility, a measure of exchange-rate swings used to price options, rose nine basis points, or 0.09 percentage point, to 3.55 percent.

Taiwan’s central bank has intervened to stem advances in the currency in the final minutes of trading on most days in the past five months, according to traders who asked not to be identified. The currency fell 0.05 percent today, having been 0.1 percent stronger two minutes before the 4 p.m. close.

The yield on the government’s 2 percent bonds due July 2017 held at 0.879 percent, according to Gretai Securities Market. The overnight interbank lending rate was also steady at 0.389 percent, a weighted average compiled by the Taiwan Interbank Money Center shows.

To contact the reporter on this story: Lilian Karunungan in Singapore at lkarunungan@bloomberg.net

To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net


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