Bloomberg News

Taiwan Dollar Forwards Rise to 14-Month High on Obama Victory

November 09, 2012

Taiwan dollar forwards rose to a 14- month high, gaining for a second week, on speculation Asia will attract more capital inflows as a result of monetary stimulus in the U.S. after President Barack Obama won re-election.

Foreign funds have bought $197 million more Taiwanese stocks than they sold so far this week, boosting net purchases this year to $1.9 billion, exchange data show. Obama defeated Republican challenger Mitt Romney, who had said he wouldn’t appoint Federal Reserve Chairman Ben S. Bernanke to a third term. The U.S. central bank announced a third round of asset purchases in September that adds $40 billion a month to the financial system.

“There is still much hot money flowing in and that’s causing appreciation,” said Albert Lee, a fixed-income trader in Taipei at Cathay United Bank Co. “That’s related to the U.S. election because Obama won.”

One-month non-deliverable forwards climbed 0.9 percent this week to NT$28.925 versus the greenback as of 4:40 p.m. in Taipei, according to data compiled by Bloomberg. The contracts rose 0.5 percent today and reached NT$28.903 earlier, the strongest level since September 2011. The contracts are at a 0.8 percent premium to the spot rate.

The Taiwan dollar strengthened 0.5 percent in the five days to NT$29.150 against its U.S. counterpart, according to data from Taipei Forex Inc. The currency rose 0.2 percent today and earlier touched NT$29.028, the strongest level since September 2011. The local dollar has gained 4.4 percent this year.

One-month implied volatility, a measure of exchange-rate swings used to price options, increased 75 basis points, or 0.75 percentage point, this week and advanced 54 basis points today to 4.14 percent.

The yield on the government’s 2 percent bonds due July 2017 fell one basis point this week and two basis points today to 0.866 percent, according to Gretai Securities Market. The overnight interbank lending rate was little changed at 0.387 percent from Nov. 2, a weighted average compiled by the Taiwan Interbank Money Center shows.

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

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


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