Taiwan Dollar Touches 13-Year High; Intervention Trims Gains

Taiwan Dollar Rises to 13-Year High as Growth Attracts Funds
Taiwan’s dollar climbed to a 13-year high. Photographer: Maurice Tsai/Bloomberg

Taiwan’s dollar, Asia’s best-performing currency this quarter, finished with an 0.5 percent gain after retreating from a 13-year high on suspected central bank intervention.

The currency rose as much as 2.3 percent to NT$29.890 versus the greenback, its highest since October 1997, before trimming its gain to close at NT$30.45. The currency has advanced 4.5 percent this quarter as global funds bought $1.5 billion more local shares than they sold this month, boosting net purchases for the year to $8 billion.

“Strong foreign inflows and solid economic growth are drivers of the Taiwan dollar’s gain,” said Henry Lin, a Taipei- based foreign-exchange trader at Taiwan Shin Kong Commercial Bank. “The central bank won’t allow such a big rise in the currency. It’ll come in to smooth the moves.”

The monetary authority has bought U.S. dollars in late trading most days since April to combat appreciation that poses a threat to exports, according to two traders familiar with the matter who asked not to be identified.

China Trade

Relations with China have improved since Taiwan President Ma Ying-jeou won election in March 2008, abandoning his predecessor’s pro-independence stance. The island has been self-ruled since Chiang Kai-shek’s Nationalists fled the mainland in 1949 after losing to Mao Zedong’s Communists in a civil war.

Under the terms of a trade pact signed in June, China agreed to open markets in 11 service sectors such as banking and to cut duties on Taiwanese imports that were worth $13.8 billion last year, or about 16 percent of the total.

Taiwan’s third-quarter growth of 9.8 percent was the fastest among Asia’s 10 largest economies, according to data compiled by Bloomberg. Taiwan’s Council for Economic Planning and Development forecast gross domestic product will increase 5 percent in 2011, the Economic Daily reported yesterday.

The island’s government bonds rose today, dragging the yield on benchmark 10-year notes down from a nine-month high. The rate on the 1.125 percent security due September 2020 fell two basis points to 1.482 percent, according to Gretai Securities Market, the island’s biggest exchange for bonds. A basis point is 0.01 percentage point.

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