Bloomberg News

Taiwan Dollar Forwards Drop as Fiscal Cliff Looms; Bonds Steady

November 15, 2012

Taiwan dollar forwards fell the most in more than five weeks as concern a failure to resolve the U.S. budget deadlock will slow global growth damped demand for emerging-market stocks. Government bonds were steady.

President Barack Obama said yesterday the world’s largest economy faces the risk of a recession should the nation fail to resolve the so-called fiscal cliff of $607 billion in automatic spending cuts and tax increases set to take effect in January. Global funds sold $354 million more Taiwanese shares than they bought in the past four days, paring net purchases for the year to $1.5 billion, according to exchange data.

“Although investors generally think the Democrats and Republicans will cut a deal in the end, the uncertainties are still there,” said Tarsicio Tong, a Taipei-based currency trader at Union Bank of Taiwan. (2838) “Taiwan’s fundamentals aren’t supporting currency appreciation.”

One-month non-deliverable forwards weakened 0.3 percent to NT$28.970 versus the greenback as of 4:19 p.m. in Taipei, according to data compiled by Bloomberg. That’s the biggest drop since Oct. 8. The forwards were at a 0.6 percent premium to the spot rate, which fell 0.1 percent to NT$29.142, based on Taipei Forex Inc. prices. Tong predicts the currency will drop to NT$29.3 by the end of the year.

Export orders declined 0.5 percent in October from a year earlier, after a 1.9 percent rise the previous month, according to the median estimate of economists in a Bloomberg survey before official data due Nov. 20.

The yield on the government’s 1.125 percent bonds due September 2022 was 1.121 percent, compared with 1.120 percent yesterday, according to Gretai Securities Market. The overnight interbank lending rate was steady at 0.391 percent, a weighted average compiled by the Taiwan Interbank Money Center shows.

To contact the reporter on this story: Andrea Wong in Taipei at awong268@bloomberg.net

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


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