Bloomberg News

Taiwan Dollar Strengthens, Bonds Drop on U.S. Growth Optimism

May 05, 2013

Taiwan’s dollar rose for a second day and government bonds declined as the island’s benchmark share index rallied to a 21-month high following U.S. jobs data that added to optimism the world’s largest economy is improving.

The unemployment rate in the U.S., Taiwan’s second-biggest export market, fell to a four-year low and payrolls expanded more than economists forecast, reports showed on May 3. Global funds bought $1.2 billion more Taiwanese stocks than they sold last week, boosting net purchases for the year to $2.5 billion, exchange data show. Developed nations’ “exceedingly accommodative” monetary policies are increasing volatility in emerging markets with large capital flows, Taiwan’s central bank said in a May 4 statement.

“There’s some temporary selling pressure for bonds today as the U.S. payrolls data was good,” said Stanford Chen, a fixed-income manager at KGI Securities Co. in Taipei. “But there’s just so much money in Taiwan now. The recent rallies in both bonds and stocks should continue.”

The Taiwan dollar advanced 0.4 percent to NT$29.492 against its U.S. counterpart as of 10:35 a.m. local time, Taipei Forex Inc. prices show. The currency touched NT$29.42 on April 30, the strongest level since Jan. 28.

The local dollar was trading 0.4 percent stronger two minutes before the 4 p.m. close on May 3 and finished with a gain of 0.1 percent. The central bank has sold the currency in the run-up to the close on most days in the past year, according to traders who asked not to be identified.

Inflation Eases

One-month non-deliverable forwards climbed 0.1 percent to NT$29.487 against the greenback, data compiled by Bloomberg show. One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, fell six basis points, or 0.06 percentage point, to 3.58 percent.

Taiwan’s consumer price index rose 1.04 percent in April from a year earlier, the least in 14 months and less than the 1.26 percent median estimate of economists in a Bloomberg survey, official data showed today.

The yield on the 0.875 percent bonds due January 2018 rose two basis points to 0.883 percent, according to Gretai Securities Market prices. The yield touched 0.86 percent on May 3, the lowest level for a benchmark five-year security since July 26, 2012.

The overnight interbank lending rate was steady at 0.388 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: James Regan at jregan19@bloomberg.net


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