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Taiwan Dollar Nears 15-Month High After Abe Wins Japan Election

Dec. 17 (Bloomberg) -- Taiwan’s dollar traded near a 15-month high on speculation Japan’s Shinzo Abe will press for more monetary stimulus after reclaiming power in national elections, boosting the outlook for inflows to the rest of Asia.

Abe’s Liberal Democratic Party captured 294 seats in the 480-member lower house of parliament yesterday, while Prime Minister Yoshihiko Noda’s Democratic Party of Japan lost three-fourths of its lawmakers, according to public broadcaster NHK’s vote count. Global funds bought $1.7 billion more Taiwanese stocks than they sold this month, taking net purchases this year to $4.9 billion, exchange data show. Japanese policy makers meet to set interest rates on Dec. 20.

The Taiwan dollar was little changed at NT$29.100 against its U.S. counterpart, 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, poised for a fourth straight annual gain.

“We might see Japan expanding monetary easing as soon as this week and Asian currencies will benefit,” said Frances Cheung, a strategist at Credit Agricole CIB in Hong Kong. “Asian central banks will try to smooth volatility in their currencies.”

Bonds Steady

Taiwan’s central bank has bought the greenback to counter gains in the island’s currency on most days in the past eight months, according to traders who asked not to be identified. The monetary authority’s mandate is to keep relative exchange-rate stability and to intervene in the event of abnormal moves, Governor Perng Fai-Nan said on Dec. 12.

The monetary authority will meet on Dec. 19 to discuss monetary policies, and is expected to keep the benchmark interest rate at 1.875 percent, according to all 15 economists surveyed by Bloomberg.

One-month implied volatility in the Taiwan dollar, a measure of expected moves in exchange rates used to price options, slipped three basis points to 2.92 percent.

The yield on the government’s 1.125 percent bonds due September 2022 was steady at 1.144 percent, according to Gretai Securities Market. The overnight interbank lending rate was little changed at 0.386 percent, a weighted average compiled by the Taiwan Interbank Money Center shows.

To contact the reporter on this story: Andrea Wong in Taipei at awong268@bloomberg.net

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

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