Taiwan’s Dollar Touches Four-Month High on Fed Decision

Taiwan’s dollar touched a four-month high as local markets reopened for the first time since the Federal Reserve unexpectedly refrained from tapering asset purchases. Government bonds advanced.

The island’s dollar gained 0.4 percent to NT$29.629 versus the greenback, prices from Taipei Forex Inc. show. It touched NT29.505 earlier, the strongest since May 10, and has rallied 1.7 percent this quarter. Local markets were closed for public holidays on Sept. 19 and 20.

Fed Chairman Ben S. Bernanke said Sept. 18 the pace of bond buying would depend on economic data and there is no set schedule for cutting stimulus that has boosted demand for emerging-market assets. A Bloomberg survey of economists had predicted a reduction of $5 billion in monthly purchases known as quantitative easing. Global funds bought more local stocks than they sold for a 17th trading day today, taking net purchases in 2013 to $5.09 billion, exchange data show.

“All Asian currencies have been rising as the expected announcement that the Fed would taper QE didn’t come,” said Tarsicio Tong, a currency trader at Union Bank of Taiwan (2838) in Taipei. “Taiwan has already been seeing fund inflows, but now there will be even more.”

The currency was trading 0.7 percent stronger 19 minutes before the 4 p.m. close today. The island’s central bank has sold the local dollar in the run-up to the close on most days since March 2012, according to traders who asked not to be identified.

“If the central bank lets go, the Taiwan dollar may strengthen even further,” Union Bank’s Tong said.

Bonds, Volatility

The yield on the 1.75 percent government notes due September 2023 dropped four basis points, or 0.04 percentage point, to 1.65 percent, according to Gretai Securities Market.

One-month non-deliverable forwards for the Taiwan dollar climbed 0.1 percent to NT$29.495, according to data compiled by Bloomberg. One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, dropped two basis points to 3.95 percent.

The overnight interbank lending rate was little changed at 0.386 percent, a weighted average compiled by the Taiwan Interbank Money Center showed.

To contact the reporter on this story: Justina Lee in Taipei at jlee1489@bloomberg.net

To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net

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