Taiwan Dollar Advances to Six-Week High on Inflows; Bonds Gain

Taiwan’s dollar rose to a six-week high as foreign funds turned net buyers of the island’s stocks. Government bonds gained on concern a bird flu outbreak will hurt the economy.

Overseas investors bought $186 million more local shares than they sold today, taking net purchases this week to $396 million, according to exchange data. Taiwan confirmed the first H7N9 bird flu infection yesterday following an outbreak that started in China last month, which helped push the Shanghai Composite Index of equities to a 2013 low.

“We’re seeing inflows not just into stocks, but bonds as well,” said Albert Lee, a fixed-income trader in Taipei at Cathay United Bank Co. “But the confirmed bird flu case last night is scaring the market a little bit. It’s hurting sentiment as the outbreak has caused slumps in China’s stock market.”

The Taiwan dollar rose 0.3 percent to NT$29.750 against its U.S. counterpart, Taipei Forex Inc. prices show. The currency touched NT$29.665 earlier, the strongest level since March 14. It was trading 0.6 percent stronger two minutes before the 4 p.m. close. The central bank has sold the local dollar in the run-up to the close on most days in the past year, according to traders who asked not to be identified.

The yield on the 0.875 percent bonds due January 2018 fell one basis point to 0.91 percent, according to Gretai Securities Market prices. The rate touched 0.902 percent earlier, the lowest level since March 6.

Production Slows

Official data this week showed the island’s economic recovery is losing momentum. Industrial production unexpectedly fell 3.28 percent in March from a year earlier, following a revised 11.6 percent slump the previous month. Export orders dropped 6.6 percent, after a 14.5 percent decline in February. Overseas shipments account for around two-thirds of Taiwan’s gross domestic product.

One-month non-deliverable forwards rose 0.4 percent to NT$29.634 per dollar, data compiled by Bloomberg show. One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, slipped 12 basis point, or 0.12 percentage point, to 3.28 percent.

The overnight interbank lending rate was steady at 0.385 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: James Regan at jregan19@bloomberg.net

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