Taiwan Dollar Forwards Snap Three-Day Drop on China Factory Data

Taiwan’s dollar forwards snapped a three-day drop as stocks rallied and a factory gauge in China, the island’s biggest export market, beat forecasts.

The Taiex index of shares jumped 1 percent, nearing its highest close in almost three years. Overseas investors pumped $170 million into local equities in the first three days of the week, taking inflows this quarter to $3.5 billion, exchange data show. China’s Purchasing Managers’ Index for manufacturing rose to a five-month high of 49.7 in May, exceeding the 48.3 estimated in a Bloomberg survey, according to a preliminary report released today by HSBC Holdings Plc and Markit Economics.

“There may be foreign funds coming in as it looks like Taiwan’s stocks may rise further,’” said Tarsicio Tong, a Taipei-based currency trader at Union Bank of Taiwan. “The Chinese PMI that just came out was also quite good.”

One-month non-deliverable forwards on Taiwan’s dollar rose 0.2 percent to NT$30.121 against the greenback as of 11:13 a.m. in Taipei, according to data compiled by Bloomberg. The contracts fell 0.2 percent over the previous three days.

Taiwan’s currency strengthened 0.3 percent to NT$30.134 against its U.S. counterpart, according to prices from Taipei Forex Inc. One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, slipped three basis points, or 0.03 percentage point, to 3.14 percent.

Ten-year government bonds snapped a six-day rally, with the yield on the 1.5 percent notes due March 2024 rising one basis point to 1.484 percent, according to prices from GreTai Securities Market. Taiwan will sell NT$30 billion ($995 million) of 30-year securities tomorrow.

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

To contact the editors responsible for this story: James Regan at jregan19@bloomberg.net Andrew Janes, Simon Harvey

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