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Taiwan Dollar Halts 3-Day Drop on Greece Outlook; Bonds Steady

Taiwan’s dollar halted a three-day slide as speculation Greece will remain in the euro buoyed demand for emerging-market assets.

Asian stocks gained after opinion polls in Greece showed voters warming to parties supporting the European Union’s bailout before an election set for June 17. Taiwanese bonds were steady after government data showed on May 25 the island’s economy expanded 0.39 percent in the first quarter, less than the median forecast of 0.4 percent economists predicted in a Bloomberg survey.

“There is optimism on the Greece front,” said Eric Hsing, a bond trader at First Securities Inc. in Taipei. “Emerging- market currencies will likely gain in the short term.”

The Taiwan dollar advanced as much as 0.3 percent to NT$29.56 before trading little changed from Friday’s level of NT$29.65 versus the U.S. currency, according to Taipei Forex Inc. It has lost 1.4 percent this month. The currency’s one- month implied volatility, a measure of exchange-rate swings traders use to price options, dropped five basis points to 5.7 percent.

Gross domestic product may rise 3.03 percent this year, the statistics bureau said last week, revising an earlier forecast of 3.38 percent. Inflation may be 1.84 percent, it said. Consumer prices rose 1.44 percent in April.

“The authorities will let the Taiwan dollar appreciate because of the underlying inflation problem here,” Hsing said.

The yield on the 1 percent government bonds due January 2017 was little changed at 0.967 percent, according to Gretai Securities Market. The overnight interbank lending rate was steady at 0.506 percent, according to a weighted average compiled by the Taiwan Interbank Money Center.

“There is a struggle between slowing growth and rising inflation, so the bond market is going to be a range-trading market with yields between 0.95 percent and 0.97 percent” this week, Hsing said.

To contact the reporter on this story: David Yong in Singapore at dyong@bloomberg.net

To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net

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