Taiwan’s dollar strengthened following the biggest weekly drop since September on optimism China will ease monetary policy, reviving demand for the island’s goods. Government bonds fell after an auction.
China should continue to implement a “proactive fiscal policy and a prudent monetary policy” to maintain growth in the world’s second-largest economy, Premier Wen Jiabao said during a tour of Wuhan in Hubei province over the weekend. A report issued two minutes before the market closed showed Taiwan’s exports unexpectedly contracted in April.
“Risk-taking sentiment has recovered today,” said Artie Yao, a fixed-income trader at First Securities Inc. in Taipei. “Bonds should continue to rally as the global economy still worries investors.”
Taiwan’s dollar strengthened 0.2 percent to NT$29.578 against its U.S. counterpart, according to Taipei Forex Inc. It touched NT$29.67 on May 18, the weakest level since Feb. 2. The currency lost 0.7 percent last week after global funds sold $1.1 billion more local stocks than they bought on concern Greece will exit the euro.
The island’s export orders dropped 3.52 percent in April from a year earlier, after a 1.58 percent contraction the previous month, official data showed today. Economists in a Bloomberg survey had predicted an increase of 0.5 percent, helping drive the currency higher in early trade.
The Taiwan dollar’s one-month implied volatility, a measure of exchange-rate swings traders use to price options, fell 36 basis points to 5.7 percent. It was 4 percent at the end of last month.
The Ministry of Finance sold NT$30 billion ($1 billion) of 10-year bonds today at a yield of 1.271 percent, more than the 1.25 percent forecast by six fixed-income traders in a Bloomberg survey. The yield on the government’s 1 percent notes due January 2017 rose one basis point, or 0.01 percentage point, in the secondary market to 0.961 percent, according to Gretai Securities Market.
The overnight interbank lending rate was little changed at 0.51 percent, according to a weighted average compiled by the Taiwan Interbank Money Center.
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