Taiwan Dollar Touches Eight-Month High on China Recovery

Taiwan’s dollar touched an eight-month high as Chinese data signaled an economic recovery in the island’s biggest export market is gathering pace.

China’s non-manufacturing purchasing manager’s index climbed to a six-month high in September, according to a report released yesterday, after a separate gauge showed manufacturing expanded last month. The Taiex index closed at the highest level since May yesterday as global funds pumped $607 million into local equities, exchange data show.

The local dollar strengthened 0.1 percent to NT$29.502 against the greenback, prices from Taipei Forex Inc. show. It touched NT$29.29 earlier, the strongest level since Jan. 28. The currency advanced 0.5 percent this week and 2.3 percent in the past three months.

“The Taiwan dollar, like Korea, is very well-leveraged to what’s happening in China,” said Patrick Bennett, Hong Kong-based strategist at Canadian Imperial Bank of Commerce. “China’s non-manufacturing PMI that was out this week was stronger than previously, and we think services are increasingly important for China,” he said, adding that he expects the island’s currency to advance toward NT$29 per dollar in the next few months.

The currency was trading 0.6 percent stronger six minutes before the 4 p.m. close today. The 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.

Forwards, Bonds

One-month non-deliverable forwards were little changed today at NT$29.310 per dollar, according to data compiled by Bloomberg. The contracts rose 0.7 percent this week. One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, gained 25 basis points today and six basis points this week to 3.92 percent.

The yield on the 1.75 percent government notes due September 2023 rose one basis point to 1.67 percent, according to Gretai Securities Market. The rate fell six basis points, or 0.06 percentage point, this week.

The overnight interbank lending rate was steady today and this week at 0.385 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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