Taiwan Dollar Forwards Advance This Week on Growth Optimism

Taiwan dollar forwards strengthened this week as data from the U.S. suggested the world’s largest economy is improving, boosting the island’s export outlook. Government bonds advanced.

Overseas investors bought $260 million more local shares than they sold this week, exchange data show. Equities (MXAP) rose across Asia rose after a report yesterday showed applications for jobless benefits in the U.S. increased less than economists forecast. The European Central Bank is ready to start buying government bonds as soon as the necessary conditions are fulfilled, President Mario Draghi said yesterday. The island’s dollar has advanced 2.7 percent since the end of July.

“Sentiment is pretty risk-on, money is going into the stock market,” said Frances Cheung, a strategist at Credit Agricole CIB in Hong Kong. “The currency has experienced a pretty big rally, so policy makers might think there isn’t much room for further appreciation.”

One-month non-deliverable forwards strengthened 0.2 percent this week and 0.3 percent today to NT$29.225 per dollar, according to data compiled by Bloomberg. They traded at a 0.5 percent premium to the spot rate.

The Taiwan dollar declined 0.1 percent this week to NT$29.368 against its U.S. counterpart, according to Taipei Forex Inc. It rose 0.1 percent today. One-month implied volatility, a measure of exchange-rate swings used to price options, increased 12 basis points to 3.87 percent this week. It fell 23 basis points today.

Inflation Slows

Taiwan’s consumer price index rose 2.96 percent in September from a year earlier, following a 3.42 percent increase the previous month that was the biggest in four years, official data showed today. Economists surveyed by Bloomberg forecast a 2.77 percent advance.

The yield on the 1.125 percent bonds due September 2022 dropped two basis points, or 0.02 percentage point, to 1.145 percent from the end of last week, according to Gretai Securities Market. The yield was steady today after touching 1.129 percent yesterday, close to the record-low yield for a benchmark 10-year note of 1.125 percent reached on July 26.

Taiwan’s central bank sold NT$100 billion ($3.4 billion) of 364-day certificates of deposits at an average yield of 0.805 percent today. The overnight money-market rate was steady at 0.387 percent, a weighted average compiled by the Taiwan Interbank Money Center shows.

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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