The New Taiwan dollar rose the most in three months as a US plan to inject liquidity into the world’s biggest economy spurred rallies in global stocks and bolstered investor demand for riskier assets.
The NT dollar climbed for a fourth day as stock exchange data showed purchases of Taiwanese equities by foreigners exceeded sales for the seventh straight day. All 10 of the most-active currencies in Asia outside Japan strengthened against the greenback after the US Federal Reserve pledged to buy as much US$300 billion of Treasuries and more mortgage bonds to help contain the deepening recession.
“The NT dollar, along with many regional currencies, has been benefiting from the improved investment sentiment in the past week and the continuing stock gains,” said David Cohen, director of Action Economics in Singapore.
The NT dollar appreciated 0.7 percent yesterday to close at NT$33.924 against the greenback. It earlier gained as much as 1.1 percent, touching a five-week high of NT$33.789.
The MSCI Asia Pacific Index of regional stocks surged more than 10 percent in the five trading sessions through yesterday, posting its longest winning streak since Jan. 5. The Standard & Poor’s 500 Index of US stocks rose to a one-month high.
Fed Chairman Ben Bernanke has stepped up efforts to prevent the credit contraction from deepening what already may be the worst recession in 60 years. The global slump is roiling Asian economies, which are almost twice as reliant on exports as the rest of the world. Taiwan’s overseas sales, equivalent to about 70 percent of GDP, fell 37.2 percent in the first two months of this year, the largest slide on record. China and the US are Taiwan’s biggest markets.
“It’s going to roller-coaster for a while with the uncertainties clouding the global outlook, and with Taiwan more exposed to the market’s collapse,” Cohen said.
The NT dollar faces a bigger risk of losses than most Asian currencies because Taiwan’s economy is more dependent on exports, Calyon said.
“We’ve yet to see the impact of the global slowdown on the NT dollar,” said Sebastien Barbe, the Hong Kong-based head of emerging market strategy at the investment-banking unit of France’s Credit Agricole SA. “Taiwan is very vulnerable because it’s very focused on exports. The risk in the currency is stronger than it used to be.”
Implied volatility on one-month US dollar-NT dollar options climbed to 11.4 percent, the highest since Nov. 25, Bloomberg data show. Traders quote implied volatility, a gauge of expected swings in exchange rates, as part of pricing options. The gauge was at 10.8 percent at the end of last year.
A similar measure of swings in the South Korean won fell to 31 percent on Wednesday from 50 percent on Dec. 31, while that for the Indonesian rupiah fell to 24 percent from 38 percent. Overseas shipments are equivalent to 60 percent of GDP in South Korea and 30 percent in Indonesia.
EARLY TALKS: Measures under consideration include convincing allies to match US curbs, further restricting exports of AI chips or GPUs, and blocking Chinese investments US President Donald Trump’s administration is sketching out tougher versions of US semiconductor curbs and pressuring key allies to escalate their restrictions on China’s chip industry, an early indication the new US president plans to expand efforts that began under former US president Joe Biden to limit Beijing’s technological prowess. Trump officials recently met with their Japanese and Dutch counterparts about restricting Tokyo Electron Ltd and ASML Holding NV engineers from maintaining semiconductor gear in China, people familiar with the matter said. The aim, which was also a priority for Biden, is to see key allies match China curbs the US
The popular Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) arbitrage trade might soon see a change in dynamics that could affect the trading of the US listing versus the local one. And for anyone who wants to monetize the elevated premium, Goldman Sachs Group Inc highlights potential trades. A note from the bank’s sales desk published on Friday said that demand for TSMC’s Taipei-traded stock could rise as Taiwan’s regulator is considering an amendment to local exchange-traded funds’ (ETFs) ownership. The changes, which could come in the first half of this year, could push up the current 30 percent single-stock weight limit
NOT TO WORRY: Some people are concerned funds might continue moving out of the country, but the central bank said financial account outflows are not unusual in Taiwan Taiwan’s outbound investments hit a new high last year due to investments made by contract chipmaker Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) and other major manufacturers to boost global expansion, the central bank said on Thursday. The net increase in outbound investments last year reached a record US$21.05 billion, while the net increase in outbound investments by Taiwanese residents reached a record US$31.98 billion, central bank data showed. Chen Fei-wen (陳斐紋), deputy director of the central bank’s Department of Economic Research, said the increase was largely due to TSMC’s efforts to expand production in the US and Japan. Investments by Vanguard International
‘SACRED MOUNTAIN’: The chipmaker can form joint ventures abroad, except in China, but like other firms, it needs government approval for large investments Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) needs government permission for any overseas joint ventures (JVs), but there are no restrictions on making the most advanced chips overseas other than for China, Minister of Economic Affairs J.W. Kuo (郭智輝) said yesterday. US media have said that TSMC, the world’s largest contract chipmaker and a major supplier to companies such as Apple Inc and Nvidia Corp, has been in talks for a stake in Intel Corp. Neither company has confirmed the talks, but US President Donald Trump has accused Taiwan of taking away the US’ semiconductor business and said he wants the industry back
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