Taiwan’s Dollar Drops Steeply on Concern over Capital Flight


Taiwan’s Dollar Drops Steeply on Concern over Capital FlightThe Taiwan’s dollar declined by the steepest margin since March on fears investors may withdraw capital out of the nation’s stocks and bonds after the U.S. Federal Reserve increased their interest-rate outlook for 2015.

The currency plunged 0.4 percent, the biggest drop since March 20, to NT$30.256 versus the U.S dollar. This is the lowest level since April 30. The Taiwan’s dollar one-month implied volatility, which tracks the expected moves in the exchange rate use to set prices to options, jumped 23 basis points or 0.23 percentage point, to 3.31 percent and previously touched a four-month peak of 3.37 percent.

“There are now more Fed officials who think rates can rise more quickly,” Andrew Tsai, a Taipei-based economist at KGI Securities Co., told Bloomberg News. “As foreign investors bought quite a lot of Taiwan stocks in the first half of the year, they may be adjusting their positions now.”

Fed officials raised their median forecast for interest rates at the end of 2015 by 25 basis points. Foreign investors reduced their investment in Taiwan’s stocks for the seventh straight day on Thursday. They had earlier purchased a net $10.3 billion of local stocks in the first half of 2014.

The yield on the Taiwan’s 1.625 percent bond that matures in September 2024 surged one basis point, or 0.01 percentage point, to 1.75 percent.

Elsewhere, the Norway’s kroner surged against its major counterparts after the nation’s central bank retained its target lending rate at 1.5 percent. It also signaled that it will begin hiking interest rates after next year, with the first increase probably expected to happen in the first quarter of 2016. 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