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Taiwan Dollar Touches One-Week High Before Interest-Rate Review

Dec. 19 (Bloomberg) -- Taiwan’s dollar touched the strongest level in more than a week and government bonds were little changed before the central bank reviews monetary policy at a quarterly meeting today.

Governor Perng Fai-nan, who said last week the island’s economy is rebounding, will hold the benchmark interest rate at 1.875 percent, according to all 23 economists in a Bloomberg survey. Global funds bought $1.4 billion more Taiwanese stocks than they sold this month, taking net purchases in 2012 to $4.6 billion, exchange data show. The yen fell to the lowest level since August 2011 against the euro amid bets the Bank of Japan will expand stimulus measures at a meeting that starts today.

“I think the consensus is the central bank will keep rates unchanged today,” said Sam Chang, a bond trader at Yuanta Securities Co. in Taipei. “The central bank may try to maintain relative stability in the Taiwan dollar as monetary easing in developed economies has caused a lot of inflows.”

The Taiwan dollar closed little changed at NT$29.102 against its U.S. counterpart in Taipei, according to data from Taipei Forex Inc. The currency touched NT$29.036 earlier, the strongest level since Dec. 10. It has appreciated 4.1 percent this year, poised for a fourth annual gain.

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 said on Dec. 12.

Volatility Drops

One-month implied volatility in the Taiwan dollar, a measure of expected moves in exchange rates used to price options, fell one basis point, or 0.01 percentage point, to 2.94 percent.

The yield on the government’s 1.125 percent bonds due September 2022 was at 1.149 percent, unchanged from yesterday, 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.

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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