Taiwan Dollar Forwards Trade Near 3-Week High on Export Rebound

The Taiwan dollar’s one-month forwards traded near a three-week high as a rebound in exports stoked optimism the island’s economy will withstand a global economic slowdown.

Investors based abroad bought $171 million more Taiwanese stocks than they sold today, while government bonds advanced. Shipments rose for the first time in seven months in September, climbing 10.4 percent from a year earlier and beating the 1 percent median estimate in a Bloomberg News survey, official data showed after the market closed yesterday. In neighboring South Korea, overseas sales dropped 1.8 percent in a third month of contraction.

“The export data turned out to be quite strong,” said Suan Teck Kin, an economist at United Overseas Bank Ltd. (UOB) in Singapore.“We may see a bit of positive sentiment there for the Taiwan dollar. We are still seeing weakness in external trade in some countries.”

One-month non-deliverable forwards traded at NT$29.29 per dollar compared with NT$29.295 yesterday, according to data compiled by Bloomberg. The contract reached NT$29.195 on Oct. 5, the strongest level since Sept. 17.

In the spot market, the Taiwan dollar ended little changed as the central bank sold the currency toward close of trading, said two traders familiar with the monetary authority’s operations who declined to be identified.

Central Bank

“In the past two weeks, the Taiwan dollar at the end of the day was biased toward the NT$29.40 to NT$29.45 area,” said Suan. “Possible intervention” curbed gains in the currency, he said. Central banks intervene by arranging purchases or sales of foreign exchange.

The currency closed at NT$29.399 against its U.S. counterpart, compared with NT$29.402 yesterday, according to Taipei Forex Inc. It has appreciated 3 percent this year. One- month implied volatility, a measure of exchange-rate swings used to price options, fell six basis points, or 0.06 percentage point, to 3.75 percent.

The yield on the 2 percent government bonds due July 2017 fell one basis point to 0.88 percent, according to Gretai Securities Market. The overnight interbank lending rate was little changed at 0.387 percent, a weighted average compiled by the Taiwan Interbank Money Centre shows.

To contact the reporters on this story: Lilian Karunungan in Singapore at lkarunungan@bloomberg.net; 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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