Bloomberg News

Taiwan Dollar Steady This Week as Inflation Counters Slowdown

July 06, 2012

Taiwan’s dollar was little changed this week as accelerating inflation added to the case for policy makers to favor a stronger currency, countering concerns over slowing economic growth. Government bonds advanced.

The consumer-price index climbed 1.77 percent from a year earlier last month, compared with 1.74 percent in May, official data showed yesterday. Most Asian stocks retreated today after interest-rate cuts in Europe and China failed to assure investors the moves will be enough to boost economic growth.

“External factors are hurting the island’s exports, but at the same time there’s the risk of accelerating inflation,” said Ma Tieying, an economist at DBS Bank Ltd. in Singapore. “These two factors combined should have a neutral effect on the currency.”

The Taiwan dollar traded at NT$29.922 against its U.S. counterpart as of the close compared with NT$29.900 last week, and slipped 0.1 percent today, according to Taipei Forex Inc. It touched NT$29.740 yesterday, the strongest level since June 21.

One-month implied volatility, a measure of exchange-rate swings used to price options, was steady at 3.8 percent today.

Official data will show on July 9 exports rose 2.3 percent in June from a year earlier after a 6.3 percent slump the previous month, according to the median estimate of economists in a Bloomberg survey.

The yield on the 1.25 percent bonds due March 2022 dropped one basis point, or 0.01 percentage point, to 1.22 percent today and during the five-day period, according to Gretai Securities Market.

The overnight interbank lending rate was little changed at 0.507 percent, according to a weighted average compiled by the Taiwan Interbank Money Centre.

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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