Bloomberg News

Taiwan Dollar Strengthens for Third Day on Europe Debt Optimism

September 04, 2012

Taiwan’s dollar advanced for a third day on bets the European Central bank will announce details of its new bond-buying plan, boosting optimism that policy makers will succeed in containing the region’s debt crisis.

The currency was trading 0.3 percent stronger one minute to the market-close before speculation of a central bank intervention trimmed gains, according to two traders who asked not to be identified. Official data to be released tomorrow may show Taiwan’s consumer prices rose 2.6 percent in August from a year earlier, the fastest pace since 2008, according to the median estimate of economists in a Bloomberg survey.

“The market is hoping for the ECB bond-buying plan to materialize,” said Ma Tieying, an economist at DBS Group Holdings Ltd. in Singapore. “Consumer prices should remain high in the third quarter due to the typhoon season.”

The Taiwan dollar strengthened 0.1 percent to NT$29.902 against its U.S. counterpart, according to Taipei Forex Inc. It rose as much as 0.4 percent earlier and touched NT$29.815, the strongest level since Aug. 10.

One-month implied volatility, a measure of exchange-rate swings used to price options, fell 21 basis points to 3.6 percent. The overnight money-market rate was steady at 0.39 percent, according to a weighted average compiled by the Taiwan Interbank Money Center.

Taiwan cut its 2012 economic growth forecast last month to 1.66 percent from 2.08 percent, after gross domestic product shrank more than initially estimated in the second quarter. Export orders fell 4.39 percent in July from a year earlier, a fifth straight monthly decline, data showed Aug. 20.

The currency’s one-month non-deliverable forwards closed 0.1 percent higher at NT$29.805 per dollar, indicating the spot rate may strengthen, according to data compiled by Bloomberg.

ECB Bond Buying

ECB President Mario Draghi told lawmakers in Brussels yesterday he would be comfortable buying bonds with maturities of up to about three years, said Jean-Paul Gauzes, a member of the European Parliament.

Global funds sold $42.9 million more local stocks than they bought today, trimming this year’s net purchases to $722 million, according to exchange data.

Typhoon Tembin caused at least NT$72.9 million ($2.4 million) worth of agricultural damage on the island in August as the storm tore through farming facilities and crops.

Government bonds were little changed. The yield on Taiwan’s 1.125 percent notes due September 2022 was at 1.169 percent from 1.167 percent yesterday, according to Gretai Securities Market.

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

To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net


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