Taiwan Dollar Rises After Central Bank Holds Rates; Bonds Gain

Taiwan’s dollar strengthened, poised to snap a two-week loss, after the central bank kept interest rates unchanged and signaled the economy will rebound next quarter. Government bonds rose.

Governor Perng Fai-nan announced yesterday he would leave the discount rate on 10-day loans at 1.875 percent and focus on inflation rather than boosting growth in 2012. A government report today may show factory output increased 8.9 percent last month from a year earlier, after contracting more than 16 percent in January, according to the median estimate of economists surveyed by Bloomberg.

“What’s happening now is growth isn’t as bad as before and the focus now is inflation,” said Wee-Khoon Chong, a strategist at Societe Generale SA in Hong Kong. “We might expect a stronger currency as a result.”

Taiwan’s dollar strengthened 0.1 percent today and during the week to NT$29.543 against its U.S. counterpart as of 9:41 a.m. local time, according to Taipei Forex Inc. One-month implied volatility, a measure of exchange-rate swings that traders use to price options, rose five basis points, or 0.05 percentage point, to 4.55 percent.

The yield on the government’s 1.25 percent bonds due March 2022 fell one basis point today and during the five-day period to 1.285 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.

The overnight money-market rate slipped one basis point to 0.392 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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