Taiwan Dollar’s Clockwork Reversals Off-Limits to Traders

(Bloomberg) -- The Taiwan dollar has erased gains with remarkable regularity in afternoon trading over the past weeks, but the predictable moves remain off-limits to traders.

The local currency rose as much as 0.6% on Monday before ending the session up 0.2% at 30.135 versus the greenback. Recent late-session paring had spurred speculation that the central bank is taking a more active role in managing the closing price. The final-hour swings touched the biggest since March 2016 as strong inflows of foreign capital pressure the currency to appreciate.

Despite its predictability, the late afternoon moves remain inaccessible as a bet for traders as Taiwan’s central bank strongly discourages them from buying or selling the U.S. dollar after 3:30 p.m., according to two traders who asked not to be named as they aren’t authorized to comment publicly on the market. The two traders said the monetary authority is dictating the closing price.

In response to a complaint about the daily operations from a member of the public on its Facebook page, the central bank responded last week that it merely “reminded” banks to finish trading before the last half hour of the session to avoid low liquidity after retail banks had closed for the day and to maintain stable foreign exchange. The central bank did not respond to requests for comment on Monday.

With the local currency near the 30 level it has not breached since June 2018, policy makers may want to curb more gains to protect exporters.

To contact the reporters on this story: Cindy Wang in Taipei at hwang61@bloomberg.net;Argin Chang in Taipei at achang153@bloomberg.net

To contact the editors responsible for this story: Sofia Horta e Costa at shortaecosta@bloomberg.net, Samson Ellis, Philip Glamann

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