Taiwan Dollar Forwards Gain Most in Week on U.S. Budget Optimism

Taiwan dollar forwards strengthened by the most in a week after President Barack Obama expressed optimism the U.S. will succeed in avoiding the so-called fiscal cliff. Government bonds were little changed.

Obama began a new round of deficit-reduction talks with top Republicans and Democrats in a bid to thwart automatic tax increases and spending cuts that threaten to throw the country into recession next year. Official data due tomorrow will show Taiwan’s export orders rose 0.3 percent in October from a year earlier, after a 1.9 percent expansion the previous month, according to the median estimate in a Bloomberg survey.

“The fiscal cliff poses a lot of uncertainties as it’s not an economic problem, it’s political,” said Samson Tu, a Taipei-based fund manager at Uni-President Assets Management Corp., which oversees $700 million. “The Taiwan dollar will probably continue its slow appreciation as other Asian currencies continue to strengthen.”

One-month non-deliverable forwards climbed 0.2 percent to NT$29.053 versus the greenback as of 4:21 p.m. in Taipei, according to data compiled by Bloomberg. The contracts were at a 0.5 percent premium to the spot rate, which appreciated 0.2 percent to NT$29.202, based on Taipei Forex Inc. prices.

The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s most-traded currencies, rose 0.1 percent today, taking gains since June to 2.2 percent. Obama expressed confidence yesterday that he could reach an agreement with Congress to avoid the $607 billion of spending cuts and tax increases.

The yield on the Taiwanese government’s 1.125 percent bonds due September 2022 was 1.118 percent, compared with 1.119 percent on Nov. 16, according to Gretai Securities Market. The overnight interbank lending rate was little changed at 0.385 percent, a weighted average compiled by the Taiwan Interbank Money Center shows.

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