Taiwan Dollar Trades Near Three-Week High Before Rate Decision

Taiwan’s dollar traded near the strongest level in three weeks before a central bank meeting tomorrow at which it is expected to raise borrowing costs.

Seventeen of 18 economists surveyed by Bloomberg predicted the Central Bank of the Republic of China (Taiwan) will lift its discount rate on 10-day loans by 0.125 percentage point to 1.75 percent. One forecast an increase to 1.875 percent. Inflation will climb to 2 percent this year from 0.96 percent in 2010, the government said last month.

“An interest-rate increase may attract foreign funds to Taiwan,” said Tarsicio Tong, a Taipei-based trader at the Union Bank of Taiwan. “The currency hasn’t been moving much lately. It’s still uncertain how much Japan’s earthquake will affect Taiwan’s companies and the economy.”

The Taiwan dollar traded at NT$29.510 as of the 4 p.m. local time close, compared with NT$29.477 yesterday, according to Taipei Forex Inc. It rose 0.2 percent earlier to NT$29.430, the strongest level since March 10. The currency has advanced 2.9 percent this year, the second-best performance among the 10 most-traded Asian currencies.

Taiwan’s economic growth this year may be reduced by as much as 0.2 percentage point due to Japan’s earthquake, Premier Wu Den-yih said yesterday. Japanese companies are transferring orders to Taiwan for flat-panel displays and chips and this will help offset some losses, he said.

Government bonds were little changed. The yield on the 1.375 percent note due March 2021, the most-traded government security, was at 1.359 percent, from 1.357 percent yesterday, according to Gretai Securities Market, the island’s biggest exchange for debt.

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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