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Taiwan Dollar Completes Biggest Weekly Drop Since March on Fed

Taiwan’s dollar completed its biggest weekly decline since March as demand for the greenback increased after Federal Reserve officials raised their forecast for U.S. borrowing costs.

The Bloomberg Dollar Spot Index rose to the highest since 2010 yesterday after the Federal Open Market Committee increased its end-2015 median estimate for the federal funds rate by 25 basis points. Global investors cut holdings of Taiwan’s equities for a eighth day today, paring this quarter’s net inflow to $2.7 billion, compared with $7.3 billion in the three months through June, exchange data show. The Taiex share index has dropped 3.7 percent since reaching a 6 1/2-year high in July.

“Taiwan’s dollar has felt the impact of the U.S. dollar,” said Cindy Yu, a Taipei-based economist at Fubon Commercial Bank. “Foreign investors’ net purchases of Taiwanese stocks have fallen. Equities had risen to pretty high levels earlier, so investors may be taking profit now.”

Taiwan’s dollar dropped 0.6 percent this week, the most since the five days ended March 21, to NT$30.258 against the greenback, prices from Taipei Forex Inc. show. The currency was little changed today. One-month non-deliverable forwards fell 0.6 percent this week to NT$30.226, according to data compiled by Bloomberg. The contracts rose 0.1 percent today.

One-month implied volatility, a gauge of expected swings in the exchange rate used to price options, jumped 55 basis points this week to 3.21 percent. The measure slipped nine basis points today.

In the bond market, the yield on Taiwan’s 1.625 percent government debt due September 2024 was little changed this week and today at 1.749 percent in when-issued trading, GreTai Securities Market prices show.

Source: http://www.bloomberg.com/