Taiwan Dollar Climbs to Three-Month High on Inflows; Bonds Rise

Taiwan’s dollar rose to a three- month high as overseas investors increased holdings of local stocks. Bonds extended their biggest advance in almost two years after economic growth missed economists’ estimates.

Global funds bought $363 million more equities than they sold yesterday, the biggest net purchases since Nov. 30, boosting the Taiex (TWSE) index to a 13-month high. Taiwan’s five-year bonds climbed for a seventh day, the longest winning streak since July, after the statistics bureau reported today first- quarter gross domestic product rose 1.54 percent from a year earlier, less than half the 3.72 percent median forecast in a Bloomberg survey.

“Money keeps going into Asian regions like Taiwan,” said Frances Cheung, a Hong Kong-based strategist at Credit Agricole CIB. “There’s not much potential for the currency to strengthen further if Taiwan wants to retain its export competitiveness.”

The Taiwan dollar advanced 1.4 percent this month to NT$29.463 against its U.S. counterpart, Taipei Forex Inc. prices show. The currency rose 0.5 percent as of 9:48 a.m. in Taipei and touched NT$29.42, the strongest level since Jan. 28.

The local dollar was trading 0.7 percent higher two minutes before the close yesterday and finished with a 0.3 percent gain. The central bank has sold the currency in the run-up to the close on most days in the past year, according to traders who asked not to be identified.

Bond Rally

One-month non-deliverable forwards for the Taiwan dollar rose 1.3 percent in April and 0.1 percent today to NT$29.418 against the greenback, according to data compiled by Bloomberg. One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, climbed eight basis points, or 0.08 percentage point, to 3.54 percent from the end of March.

The yield on the 0.875 percent bonds due January 2018 fell 12 basis points to 0.892 percent this month, according to Gretai Securities Market prices. That’s the biggest monthly decline in benchmark five-year yields since August 2011.

The overnight interbank lending rate was little changed at 0.388 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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