Taiwan Dollar Advances to Three-Week High on Bernanke Comments

Taiwan’s dollar rose to a three- week high after Federal Reserve Chairman Ben S. Bernanke said more U.S. stimulus will be available if necessary, boosting demand for riskier assets. Government bonds gained.

U.S. policy makers upgraded their forecasts for economic growth and the labor market yesterday, while repeating their view that borrowing costs are likely to remain “exceptionally low” at least through late 2014. Taiwan’s five-year bonds rose after the Cabinet approved a finance ministry plan to tax capital-gains on stocks, options and futures trading.

“Bernanke’s comments spurred risk-taking today,” said Samson Tu, a Taipei-based fund manager at Uni-President Assets Management Corp., who helps manage $1.6 billion of fixed-income securities. “It’s boosting the Taiwan dollar and regional currencies.”

Taiwan’s dollar rose 0.4 percent to NT$29.412 against its U.S. counterpart, according to Taipei Forex Inc. The currency was trading at a three-week high of NT$29.353 before trimming the advance on speculation the central bank sought to curb gains, according to two traders who declined to be identified.

One-month implied volatility, a measure of exchange-rate swings traders use to price options, rose 36 basis points, or 0.36 percentage point, to 3.53 percent.

The yield on Taiwan’s 1 percent bonds due January 2017 dropped one basis point to 1.017 percent, according to Gretai Securities Market. That’s the lowest level for benchmark five- year yields this month.

The overnight money-market was little changed at 0.5 percent, according to a weighted average compiled by the Taiwan Interbank Money Center. It reached 0.503 percent yesterday, the highest level since 2008.

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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