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Taiwan Dollar Touches Eight-Week High on U.S. Growth Optimism

Jan. 3 (Bloomberg) -- Taiwan’s dollar touched the highest level in almost eight weeks as an expansion in U.S. factory output added to optimism the global economic recovery is gaining traction, boosting the outlook for the island’s exports.

The Institute for Supply Management’s manufacturing index climbed to 50.7 in December from a three-year low of 49.5 in November, the Tempe, Arizona-based group reported yesterday. Data due on Jan. 7 may show Taiwan’s overseas shipments increased 4.7 percent last month from a year earlier, up from 0.9 percent in November, according to the median estimate of economists in a Bloomberg survey.

“Sentiment over the economic outlook of the U.S. has improved,” said Tarsicio Tong, a Taipei-based foreign-exchange trader at Union Bank of Taiwan. “But I think we still need a few months to see whether Taiwan’s exports have bounced back.”

The Taiwan dollar was little changed at NT$29.091 against its U.S. counterpart, according to Taipei Forex Inc. It reached NT$28.978 earlier, the strongest level since Nov. 12.

The monetary authority has bought the greenback to counter gains in the island’s currency on most days in the past nine months, according to traders who asked not to be identified. The central bank’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.

One-month implied volatility in the Taiwan dollar, a gauge of expected moves in exchange rates used to price options, fell eight basis points to 3.15 percent.

Stock Inflows

The U.S. Congress passed a bill that averts automatic spending cuts and tax increases that threatened to push the world’s largest economy into recession, while China reported today that its services industries expanded at the fastest pace in four months.

Government bonds were little changed. The yield on the 1.125 percent notes due September 2022 held at 1.156 percent, according to Gretai Securities Market. The overnight interbank lending rate was steady 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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