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Taiwan Dollar Rises a Second Day on Fed Easing Optimism

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Dec. 12 (Bloomberg) -- Taiwan’s dollar advanced for a second day on speculation the Federal Reserve will expand asset purchases that boost the supply of U.S. currency and spur demand for emerging-market assets.

The Fed will announce today $45 billion in monthly Treasury buying after a two-day meeting, according to a Bloomberg News survey of economists. Taiwan’s central bank also meets next week to review monetary policy after keeping the discount rate on 10-day loans unchanged at 1.875 percent for the fifth time in a row on Sept. 20.

“Everybody wants to know what the Fed will say and what the Taiwan central bank will say,” said Tarsicio Tong, a Taipei-based foreign-exchange trader at Union Bank of Taiwan. “Next year foreign money, or hot money, will flow into Asia again if the Federal Reserve conducts more quantitative easing.”

The Taiwan dollar strengthened 0.1 percent to NT$29.108 against its U.S. counterpart, after a 0.1 percent gain yesterday, according to data from Taipei Forex Inc. The currency touched NT$28.959 on Nov. 12, the strongest level since September 2011. It has appreciated 4.1 percent this year as overseas investors bought $4.79 billion more Taiwan stocks than they sold.

One-month implied volatility, a measure of exchange-rate swings used to price options, dropped 15 basis points, or 0.15 percentage point, to 3 percent.

The currency may trade between NT$29 and NT$29.3 for the rest of the year after the central bank pledged yesterday to maintain stability in the foreign-exchange market, Tong said.

The yield on the government’s 1.125 percent bonds due September 2022 increased one basis point to 1.143 percent, according to Gretai Securities Market. The overnight interbank lending rate was 0.386 percent, a weighted average compiled by the Taiwan Interbank Money Center shows.

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

To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net

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