Taiwan Dollar Volatility Sinks as Geopolitical Tensions Fade
(Bloomberg) -- Traders are dialing back expectations for swings in the Taiwan dollar as geopolitical tensions ease and investors return their focus to the global economic outlook.
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Three-month implied volatility in the currency, a gauge of anticipated moves, slipped to the lowest since September this week. The measure rose in March amid global banking tensions and pushed even higher at the start of April when Taiwan’s president Tsai Ing-wen prepared for a US trip that spurred Beijing to launch a series of military drills around the island.
The easing in expected price swings for Taiwan’s dollar coincides with moves seen in other regional currencies. Three-month implied volatility in the haven yen has also fallen back as the global bond market calms and traders pull trim bets on Bank of Japan policy tweaks, while the yuan equivalent has retreated amid a lack of catalysts in Chinese markets.
In other asset classes, tensions in the Taiwan Strait barely registered on investor radars, unlike the jitters caused by then US House Speaker Nancy Pelosi’s trip to the island in August.
Markets Judge Taiwan Strait Tension as Little More Than Bluster
“The fact is that there will always be some cross-strait uncertainties due to the US-China tension and also Taiwan’s own macro underperformance in particular exports,” said Stephen Chiu, chief Asia foreign exchange and rates strategist at Bloomberg Intelligence in Hong Kong. “There are better Asian currencies such as the Korean won to express a weaker US dollar view, keeping Taiwan dollar volatility at a low level in the near term.”
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