Taiwan Dollar Touches Five-Month High as Less Intervention Seen

Taiwan’s dollar touched the strongest level in almost five months amid speculation the central bank has scaled back intervention aimed at weakening the currency to reduce inflationary pressures.

The monetary authority 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. Planned increases in transport and electricity costs will drive up inflation in the fourth quarter, according to a report by Standard Chartered Plc strategists including Hong Kong-based Robert Minikin last month.

The local dollar closed 0.3 percent stronger at NT$29.532 against its U.S. counterpart, prices from Taipei Forex Inc. show. It rose as much as 0.9 percent earlier to NT$29.353, the strongest level since May 9. The currency weakened 0.4 percent in the last eight minutes of trading amid suspected central bank intervention.

“Since oil, electricity and rail prices have gone up recently, there is inflationary pressure in October, which is why the central bank has been less active in blocking appreciation,” said Tarsicio Tong, a currency trader at Union Bank of Taiwan (2838) in Taipei. “The Taiwan dollar has been pulled back to NT$29.6 at the close lately, but the market has been allowed to move more freely during the day.”

One-month non-deliverable forwards on the local dollar rose 0.4 percent today to NT$29.33, according to data compiled by Bloomberg. The contracts touched NT$29.315, also the strongest since May 9. One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, fell nine basis points, or 0.09 percentage point, to 3.71 percent.

The yield on the 1.75 percent notes due September 2023 was little changed at 1.66 percent, according to Gretai Securities Market. The overnight interbank lending rate was steady at 0.384 percent, a weighted average compiled by the Taiwan Interbank Money Center showed.

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

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

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