Taiwan Dollar Rises as Drop in Exports Slows; Bonds Decline

By Bob Chen and Yu-huay Sun

March 10 (Bloomberg) -- Taiwan’s dollar rose by the most in more than two months after a government report late yesterday showed a contraction in exports slowed in February and as stocks gained. Bonds fell.

The currency touched a two-week high as the 29 percent drop in overseas sales was less than in the previous two months and a record 44 percent plunge in January, the Ministry of Finance said after markets closed. Taiwan’s Taiex index of shares gained 0.6 percent, rising for the fifth time in six days.

“You can take the last few months as indicating that the plunge is bottoming out,” said David Cohen, director of Asian forecasting at Action Economics in Singapore. “At least exports are no longer in free fall. Clearly it’s a serious recession, there’s no escaping that, and the Taiwan dollar will slip a little further.”

Taiwan’s dollar gained 0.5 percent to NT$34.64 as of 11:31 a.m. local time, according to Taipei Forex Inc. It reached NT$34.623, the strongest level since Feb. 23. It touched a seven- year low of NT$35.297 on March 3. A decline to NT$38 this year “is certainly” possible, Cohen said.

Taiwan Memory Co., the company being formed by the government to reorganize the island’s chip industry, may receive as much as NT$30 billion ($866 million) in state funds, John Hsuan, who was appointed last week to oversee the formation of the company, told reporters in Hsinchu, Taiwan.

Bonds Fall

Taiwan’s 10-year bonds fell for the first time in three days on speculation the government will increase debt sales as tax revenue falls.

The Economic Daily News reported today that Taiwan expects tax collections to fall by NT$100 billion because of the financial crisis, citing Minister of Finance Lee Sush-der.

“The market is affected by the news that the finance ministry said the government’s income may be falling,” said Chen Hung-hsiu, a bond trader at Grand Cathay Securities Corp. in Taipei. “Everybody knows the amount of bonds to be sold will remain an issue.”

The yield on the 1.375 percent bond maturing March 2019 climbed three basis points to 1.56 percent, according to Gretai Securities Market, Taiwan’s biggest exchange for bonds. Its price fell 0.2897, or NT$289.7 per NT$100,000 face amount, to 98.2749.

To contact the reporters on this story: Bob Chen in Hong Kong at bchen45@bloomberg.net; Yu-huay Sun in Taipei ysun7@bloomberg.net