Taiwan’s Dollar Declines After Rating Outlook Cut to Negative

By Bob Chen

April 15 (Bloomberg) -- Taiwan’s dollar weakened on concern the government’s stimulus spending is straining public finances amid a recession.

The local currency snapped two days of gains after Standard & Poor’s Rating Services yesterday cut the outlook on the island’s long-term credit rating to negative from stable, citing a “marked deterioration in the government’s fiscal position.” The jobless rate may exceed 6 percent in the coming months and peak in September, the Chinese-language Commercial Times reported today, citing Vice President Vincent Siew.

“Taiwan’s economic fundamentals haven’t changed,” said Tigr Cheng, an economist at Polaris Securities Co. in Taipei. “We are expecting more bad data to come in May or June, which will take the Taiwan dollar weaker.”

The island’s currency slipped 0.2 percent to NT$33.674 as of 9:58 a.m. local time, according to Taipei Forex Inc.

Taiwan’s government debt is forecast at 142 percent of revenue at the end of 2009, Standard & Poor’s credit analyst Kim Eng Tan said in a statement yesterday. The government is forecasting a NT$134.6 billion ($4 billion) deficit this year, the second consecutive shortfall.

Exports fell for a seventh straight month in March, extending the longest losing streak in seven years. The economy shrank an unprecedented 8.36 percent in the fourth quarter, pushing the island into its first recession since 2001.

The local dollar may drop to NT$34.2 against the greenback by the end of the second quarter, Polaris’ Cheng said. The currency climbed 0.5 percent in the first two days of this week.

To contact the reporters on this story: Bob Chen in Hong Kong at bchen45@bloomberg.net