Taiwan Dollar Completes Weekly Gain on Inflows, Economic Growth

Taiwan’s dollar completed its first weekly advance in three on speculation economic growth and rallying equities will attract more capital.

Taiwan’s economy expanded 3.04 percent in the first quarter from a year earlier, official data showed this week, compared with the 3 percent median forecast in a Bloomberg survey. Global funds boosted holdings of the island’s stocks by $3.1 billion this quarter, exchange data show, while the benchmark equity index climbed to its highest level in almost three years on April 23.

“The Taiwanese dollar has been supported by a healthy external position, but the price action has been limited,” said Frances Cheung, head of Asian rates strategy at Credit Agricole CIB in Hong Kong.

The currency strengthened 0.4 percent this week to NT$30.212 against its U.S. counterpart, and was up 0.2 percent from April 30, according to prices from Taipei Forex Inc. The island’s financial markets were shut yesterday for a holiday.

Taiwan’s government sent letters to 39 local banks informing them that their clients must be made aware of the risks of investing in Target Redemption Forwards in the Chinese currency, the Taipei-based Economic Daily News reported today, without saying where it got the information. The contracts pay a monthly income to investors so long as the yuan remains above a certain strike price.

Bond Market

One-month non-deliverable forwards in the Taiwan dollar rose 0.4 percent this week to NT$30.160 against the greenback, according to data compiled by Bloomberg. The contracts were little changed today. One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, fell two basis points, or 0.02 percentage point, from April 25 to 3.48 percent.

The yield on Taiwan’s benchmark 10-year government bonds fell two basis points today to 1.53 percent, according to data from Gretai Securities Market.

To contact the reporter on this story: Kyoungwha Kim in Singapore at kkim19@bloomberg.net

To contact the editors responsible for this story: Amit Prakash at aprakash1@bloomberg.net Simon Harvey, Andrew Janes

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