Taiwan Dollar Halts 2-Day Drop as Rate Seen on Hold; Bonds Rise

Taiwan’s dollar halted a two-day decline on speculation the central bank will keep interest rates unchanged today as the economy recovers. Government bonds advanced.

Eleven of 12 economists surveyed by Bloomberg forecast the discount rate on 10-day loans will be left at 1.875 percent, with one predicting a 25-basis point cut. Global funds bought $15.4 million more local stocks than they sold yesterday, bringing net purchases this month to $779 million, according to exchange data. Export orders rose 17.6 percent in February from a year earlier, following an 8.6 percent slump in January, the government reported this week.

“I think the central bank will keep interest rates unchanged as our economy is starting to stabilize,” said James Wang, a debt trader at Yuanta Securities Co. in Taipei. “The central bank won’t raise rates easily because it’s careful about hot money inflows.”

Taiwan’s dollar was little changed at NT$29.574 against its U.S. counterpart, according to Taipei Forex Inc. One-month implied volatility, a measure of exchange-rate swings that traders use to price options, dropped eight basis points, or 0.08 percentage point, to 4.5 percent.

The yield on the government’s 1.25 percent bonds due March 2022 fell one basis point to 1.289 percent, according to Gretai Securities Market. It reached 1.30 percent on March 15, the highest level for a benchmark 10-year note since Jan. 6, according to data compiled by Bloomberg.

“It looks like 1.3 percent is the psychological level at the moment,” Wang said. “There are buyers coming in whenever we get close to that level.”

The overnight money-market rate was little changed at 0.398 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: Sandy Hendry at shendry@bloomberg.net

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