Taiwan dollar forwards rose to a six-week high as overseas investors increased holdings of the island’s assets. Government bonds declined.
Global funds bought $126 million more local stocks than they sold today, taking net purchases this month to $1.5 billion, exchange data show. The yen fell to a 20-month low before Shinzo Abe takes over as Japan’s prime minister amid speculation he will seek to expand measures that pump money into markets to spur growth. The Federal Reserve said Dec. 12 it will start buying $45 billion a month of Treasuries, adding to $40 billion a month of existing mortgage-debt purchases.
“Monetary stimulus from developed countries will continue to cause inflows into Taiwan,” said Tarsicio Tong, a Taipei-based foreign-exchange trader at Union Bank of Taiwan. “The non-deliverable forward contracts show expectations are rising for the Taiwan dollar to appreciate.”
One-month non-deliverable forwards rose 0.1 percent to NT$28.900 per dollar as of 4:29 p.m. in Taipei, according to data compiled by Bloomberg. They reached NT$28.887 earlier, the strongest level since Nov. 15. The contracts are at a 0.8 percent premium to the spot rate, which was little changed at NT$29.128, based on Taipei Forex Inc. prices. The currency has appreciated 4 percent this year, poised for a fourth annual gain.
One-month implied volatility in the Taiwan dollar, a measure of expected moves in exchange rates used to price options, rose 15 basis points to 3.15 percent.
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. 19.
The yield on the 1.125 percent bonds due September 2022 rose one basis point to 1.167 percent, according to Gretai Securities Market. Borrowing costs on benchmark 10-year bonds dropped 12 basis points in 2012.
The overnight interbank lending rate was steady at 0.39 percent, a weighted average compiled by the Taiwan Interbank Money Center shows.