Traders in Taipei sold short-dated Taiwan dollar/greenback options last week to offload vol, driving one-month implied volatility down 1.5% to 2.73%/3.73% Tuesday. In the spot market, the pair continued to stay range bound around TWD32.343. The Taiwan dollar has settled into this range as Taiwan's equity markets have stabilized in recent weeks, as have bond and interest-rate markets, according to a trader. Taiwan's central bank is believed to have been intervening in cash markets to stabilize the currency, he said.
Peter Redward, Asian currency strategist at Deutsche Bank in Singapore, said the Taiwan dollar is closely linked to Taiwan's equity markets. These markets are heavily weighted towards large Taiwanese high-tech companies such as Acer, which have been solidly outperforming the Nasdaq Stock Market for several weeks, he said. This has helped strengthen and stabilize Taiwan's stock markets, and in turn the currency, he said.
