Bloomberg News

Taiwan Dollar Strengthens, Bonds Decline on Inflation Concern

April 17, 2012

Taiwan’s dollar rose on speculation the central bank will allow greater currency appreciation to tame consumer-price increases. Government bonds dropped.

Taiwan’s central bank may allow faster rises in the overnight rate and the local dollar, the Commercial Times reported today, citing an unidentified monetary authority official. Taiwan Power Co., the island’s only electricity retailer, said on April 12 it will increase prices for the first time in more than three years after posting losses on rising fuel costs. The overnight interbank lending rate hit 0.487 percent yesterday, the highest level since January 2009.

“The central bank is acting to tackle the inflation problem and bond yields are reflecting people’s worries on consumer prices,” said Stanford Chen, a Taipei-based fixed- income manager at KGI Securities Co. “The overnight rate should continue to tread higher.”

Taiwan’s dollar gained 0.1 percent to NT$29.542 against its U.S. counterpart, according to Taipei Forex Inc. One-month implied volatility, a measure of exchange-rate swings traders use to price options, climbed 10 basis points to 4 percent.

Consumer prices rose 1.21 percent in March from a year earlier, after a 0.23 percent increase the previous month, government data show.

The yield on the government’s 1 percent securities due January 2017 rose one basis point, or 0.01 percentage point, to 1.05 percent, according to Gretai Securities Market. The overnight money-market rate was little changed at 0.483 percent, according to a weighted average compiled by the Taiwan Interbank Money Center.

To contact the reporter on this story: Andrea Wong in Taipei at awong268@bloomberg.net

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


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