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Taiwan Dollar Erases Gain on Suspected Central Bank Intervention

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Dec. 7 (Bloomberg) -- Taiwan’s dollar reversed gains in the final two minutes of trading on speculation the central bank bought the dollar to curb appreciation that may hurt exporters.

The suspected intervention came as the Ministry of Finance reported that exports increased 21.8 percent in November from a year earlier. The median estimate of 12 economists surveyed by Bloomberg News was for a gain of 18.9 percent. The currency had earlier climbed as much as 1.8 percent after the statistics bureau said yesterday consumer prices increased 1.53 percent from a year earlier, the quickest pace in nine months.

Higher inflation stems from “faster economic growth and leads to a stronger exchange rate,” said Hao-Yun Juan, a currency trader at King’s Town Bank in Taipei. “The central bank will let the Taiwan dollar appreciate in a moderate way.”

Taiwan’s dollar ended at NT$30.630 against its U.S. counterpart, compared with 30.625 yesterday, according to Taipei Forex Inc. The currency has appreciated 1.3 percent in the past two months, the best performance among Asia’s most-traded currencies.

The central bank has bought the U.S. dollar almost every day in the past eight months to shield exporters, according to traders who declined to be identified as the monetary authority doesn’t publicly disclose such details.

Taiwan’s policy makers have increased interest rates twice this year to 1.50 percent, and the central bank reviews rates next on Dec. 30.

“We expect another 12.5-basis point rate hike later this month, followed by one hike in each quarter in 2011,” analysts led by Michael Spencer at Deutsche Bank AG said in a report dated yesterday.

The yield on the 2 percent bond due in July 2015 was little changed at 0.993 percent, according to Gretai Securities Market, the island’s biggest exchange for bonds. A basis point is 0.01 percentage point.

To contact the reporters on this story: Lilian Karunungan in Singapore at at lkarunungan@bloomberg.net.

To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net.

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