Bloomberg News

Taiwan Dollar Strengthens on Speculation Fed Will Ease Further

April 09, 2012

Taiwan’s dollar snapped a three-day loss on speculation the Federal Reserve will ease monetary policy to support the U.S. economy, boosting the supply of funds available to be invested in emerging markets. Bonds were steady.

The island’s benchmark share index rose 1 percent after dropping 1.4 percent yesterday amid concern authorities will impose a capital-gains tax on stock trades. Fed Chairman Ben S. Bernanke said yesterday the U.S. economy has yet to recover after data released last week showed employers added fewer jobs than forecast in March.

“Taiwan’s dollar is appreciating because the U.S. dollar market is expecting the Fed will do quantitative easing because of the weak labor market,” said James Wang, a debt trader at Yuanta Securities Co. in Taipei. Gains in local stocks “may have helped the Taiwan dollar a little bit,” he said.

Taiwan’s dollar climbed 0.2 percent to NT$29.502 against its U.S. counterpart as of 10:09 a.m. local time, according to Taipei Forex Inc. One-month implied volatility, a measure of price swings that options traders use, was unchanged at 4 percent.

The Dollar Index traded on ICE Futures in New York, which compares the currency to those of six trading partners, fell for a third day. “About three and a half years have passed since the darkest days of the financial crisis, but our economy is still far from having fully recovered from its effects,” Bernanke said.

Taiwan’s finance ministry will submit a proposal to the government in two days that it impose a tax on any capital gains made on stock transactions from next year, according to a statement posted on its web site yesterday.

The yield on the island’s 1 percent bonds due January 2017 was little changed at 1.02 percent, according to Gretai Securities Market. The government will sell NT$40 billion ($1.4 billion) of five-year securities today. The overnight money- market dropped two basis points, or 0.02 percentage point, to 0.430 percent, according to a weighted average compiled by the Taiwan Interbank Money Center.

To contact the reporter on this story: Lilian Karunungan in Singapore at lkarunungan@bloomberg.net

To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net


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