Taiwan Dollar Trades Near Month’s High on Inflows; Bonds Steady

Taiwan’s dollar traded near its December high after overseas investors boosted holdings of the island’s shares. Government bonds were little changed.

Global funds bought $1.5 billion more local stocks than they sold this month, taking net purchases this year to $4.8 billion, exchange data show. The yen touched a 27-month low today on speculation the newly-installed Prime Minister Shinzo Abe will push for further monetary stimulus to spur the economy.

“Foreign funds have been coming into Taiwan’s stocks,” said Samson Tu, a Taipei-based fund manager at Uni-President Assets Management Corp., which oversees $700 million. “Japan’s easing might cause money to flow into other Asian economies.”

The Taiwan dollar was little changed at NT$29.126 against its U.S. counterpart, according to data from Taipei Forex Inc. The currency touched NT$29.035 earlier, near the NT$29.019 reached on Dec. 3 that was the strongest level since Nov. 13. It has climbed 4 percent this year, poised for a fourth annual gain.

One-month implied volatility in the Taiwan dollar, a measure of expected moves in exchange rates used to price options, rose one basis point to 3.16 percent.

Taiwan’s central bank has bought the greenback to counter gains in the island’s currency on most days in the past eight months, according to traders who asked not to be identified. The monetary authority’s mandate is to keep relative exchange-rate stability and to intervene in the event of abnormal moves, Governor Perng Fai-Nan said on Dec. 19.

The yield on the 1.125 percent bonds due September 2022 was little changed at 1.169 percent, according to Gretai Securities Market. Borrowing costs on benchmark 10-year bonds dropped 12 basis points, or 0.12 percentage point, in 2012.

The overnight interbank lending rate was steady at 0.392 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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