Taiwan Dollar Has Weekly Advance on Stock Inflows; Bonds Steady

Taiwan’s dollar gained this week as global funds poured money into the island’s stocks on speculation central banks worldwide will act to reverse an economic slowdown. Bonds were little changed.

The currency advanced in three of the four weeks this month as global funds bought $3.2 billion more Taiwanese stocks than they sold, according to exchange data. Net purchases were $629 million in the last four days. People’s Bank of China Governor Zhou Xiaochuan said Aug. 22 adjustments to interest rates and reserve requirements are possible, and minutes of the last Federal Reserve meeting released this week showed many policy makers favor more stimulus.

“There’s money piling up in the stock market and sentiment has been quite positive,” said Eric Hsing, a fixed-income trader at First Securities Inc. in Taipei. “Bond traders are more cautious because we’ve yet to see any concrete actions taken by central banks.”

Taiwan’s dollar advanced 0.1 percent this week to NT$30 against its U.S. counterpart, according to Taipei Forex Inc. It slipped 0.1 percent today, while touching a two-week high of NT$29.82 earlier. One-month implied volatility, a measure of exchange-rate swings used to price options, dropped 10 basis points to 3.3 percent during both periods.

The island’s industrial production fell 0.02 percent in July from a year earlier, a fifth monthly drop, official data showed yesterday.

The yield on Taiwan’s 1.25 percent notes due March 2022 was little changed this week and today at 1.182 percent, according to Gretai Securities Market.

The overnight money-market rate climbed one basis point today and from the end of last week to 0.393 percent, according to a weighted average compiled by the Taiwan Interbank Money Centre.

To contact the reporter on this story: Andrea Wong in Taipei at awong268@bloomberg.net

To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net

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