Taiwan Dollar Gains a Third Day on Stimulus Plans; Bonds Steady

Taiwan’s dollar strengthened for a third day, the longest run of gains in more than five weeks, as governments worldwide consider stimulus measures to shield their economies from Europe’s debt crisis. Bonds were steady.

Official data showed today exports dropped 6.3 percent in May from a year earlier, a third month of contraction, the worst performance since 2009. Taiwan should raise the limit on government borrowing should Europe’s woes worsen, the Economic Daily News reported, citing Kuan Chung-ming, minister without portfolio. China has delayed plans to tighten bank capital rules, while India is considering increasing development spending to boost growth.

“Governments are rolling out measures to save their economies,” said Tobby Lin, a fixed-income trader at Yuanta Securities Co. in Taipei. “Raising the debt ceiling will require a lot of work, so the bond market isn’t reacting on that information.”

Taiwan’s dollar gained 0.1 percent to NT$29.906 against its U.S. counterpart, according to Taipei Forex Inc. It touched NT$30.070 on June 5, the weakest level since Jan. 17. One-month implied volatility, a measure of exchange-rate swings traders use to price options, fell 44 basis points, or 0.44 percentage point, to a two-week low of 5.25 percent.

Federal Reserve Vice Chairman Janet Yellen said yesterday that further monetary stimulus may be warranted as the U.S. economy “remains vulnerable to setbacks.”

The yield on the government’s 1 percent bonds due January 2017 was little changed at 0.93 percent, according to Gretai Securities Market. It reached 0.91 percent on June 4, the lowest level for benchmark five-year rates since October 2010.

The overnight interbank lending rate was little changed at 0.51 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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