Taiwan Dollar Forwards Reach Five-Month High on U.S. Optimism

Taiwan dollar forwards rose to a five-month high as signs of improvement in the U.S., the world’s largest economy, spurred demand for emerging-market assets and brightened the outlook for Asian exports.

The Bloomberg-JPMorgan Asia Dollar index rose 0.1 percent, advancing for a fifth day, after data showed U.S. industrial production rose and earnings topped estimates at almost three quarters of companies in the S&P 500 that have released results so far. Taiwan’s export orders gained 1.9 percent in September from a year earlier, after dropping 1.5 percent the previous month, a Bloomberg survey showed before data due tomorrow.

“Global sentiment is better for Asian currencies,” said Tarsicio Tong, a currency trader at Union Bank of Taiwan in Taipei. “There could be some kind of adjustment from the central bank, to make the appreciation in the Taiwan dollar slower.”

One-month non-deliverable forwards traded at NT$29.110 as of 5:17 p.m. in Taipei, from NT$29.12 yesterday, according to data compiled by Bloomberg. The contracts reached NT$29.071 earlier, the strongest level since May 9, and are at a 0.5 percent premium to the spot rate.

In the spot market, the local currency strengthened 0.2 percent to NT$29.246 against its U.S. counterpart, data from Taipei Forex Inc. showed. It touched NT$29.142 earlier, the strongest level since May 2. The Taiwan dollar may reach NT$29 in the next two weeks, Tong predicted. One-month implied volatility, a measure of exchange-rate swings used to price options, increased one basis point, or 0.01 percentage point, to 3.50 percent.

Taiwan’s central bank has intervened to stem advances in the currency in late trading on most days in the past five months, according to traders who asked not to be identified.

The yield on the 2 percent government bonds due July 2017 was little changed at 0.88 percent, according to Gretai Securities Market. The overnight interbank lending rate was steady at 0.387 percent, a weighted average compiled by the Taiwan Interbank Money Center shows.

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