Weak U.S. Growth Gives Taiwan’s Dollar Momentum against the Greenback

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Weak U.S. Growth Gives Taiwan’s Dollar Momentum against the GreenbackMost emerging market currencies have advanced against the U.S. dollar after weak U.S. economic data dampened speculation that the Federal Reserve may increase interest rates soon. The Taiwan dollar is one of the beneficiaries, surging to the strongest level in 11 weeks versus the greenback.

The Taiwan dollar advanced 0.2 percent to trade at NT$29.992 versus the U.S. dollar. The local dollar had earlier hit NT$29.933, the highest level since April 10. The 1-month non-deliverable forwards jumped 0.2 percent to NT$29.895.

“The U.S. GDP data was quite disastrous,” Michelle Tsai, an economist at Jih Sun Securities Co in Taipei spoke to Bloomberg. “The Fed may only raise interest rates next year. Foreign funds have also been entering Asian markets, including Taiwan.”

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The currency’s one-month implied volatility, which tracks the expected swings in the exchange rate used to assign prices to options, declined 0.04 percentage point or four basis points, to 2.58 percent.

The U.S. economy contracted 2.9 percent in the first three months of the year from the last quarter of 2013, making it the weakest performance since 2009. The new revision in GDP growth is mainly due to fresh data that showed that healthcare spending grew much slower than expected.

Global funds have invested $585 million in local stocks since Monday, while the nation’s central bank retained the cash rate at 1.875 percent, the twelve-consecutive quarter to do so. Taiwan’s sovereign bonds advanced once again, with yield on 1.5 percent notes that expire in March 2024 plunging two basis points to 1.60 percent. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.

To contact the reporter of this story; Yashu Gola at yashu@forexminute.com