Taiwan’s Dollar Has Best Month Since January on Equity Inflows

Taiwan’s dollar completed the biggest monthly gain since January after a Federal Reserve plan to boost asset purchases spurred demand for the island’s stocks.

The local currency gained 2.1 percent this month, the second-best performer in Asia, as global funds bought $1.9 billion more Taiwanese stocks than they sold, exchange data showed. Central bank Governor Perng Fai-nan said Sept. 26 inflows triggered by the Fed’s latest quantitative easing will be less than those the previous two programs fueled, and that the monetary authority’s mandate is to keep relative exchange-rate stability and to intervene in the event of abnormal moves.

“Money is flowing into emerging markets following the QE3 announcement,” said Samson Tu, a Taipei-based fund manager at Uni-President Assets Management Corp., who helps manage $1.6 billion of fixed-income assets. “But Taiwan’s central bank has made it clear it’ll maintain its currency at a more stable level. We might see the appreciation slowing.”

The Taiwan dollar rose 0.3 percent today to NT$29.342 against its U.S. counterpart, according to Taipei Forex Inc. It reached NT$29.198 on Sept. 17, the strongest level since May 3, and has appreciated 1.9 percent this quarter.

One-month non-deliverable forwards in the currency advanced 0.3 percent to NT$29.295 today, according to data compiled by Bloomberg. One-month implied volatility, a measure of exchange-rate swings used to price options, dropped five basis points, or 0.05 percent, to 3.7 percent.

The Fed said on Sept. 13 it will start open-ended purchases of $40 billion of mortgage debt per month, and hold interest rates near zero at least through mid-2015.

Government bonds were little changed today. The yield on Taiwan’s 1.125 percent bonds due September 2022 was at 1.169 percent, according to Gretai Securities Market. The overnight money-market rate slipped one basis point to 0.388 percent, a weighted average compiled by the Taiwan Interbank Money Center shows.

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