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Taiwan Dollar in Best Month Since September on Flows; Bonds Gain

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April 30 (Bloomberg) -- Taiwan’s dollar had the best monthly gain since September as global funds increased holdings of local stocks. Bonds had their biggest advance in almost two years after economic growth missed economists’ estimates.

Foreign investors bought $1 billion more equities than they sold this month, boosting the Taiex index to a 13-month high. The statistics bureau reported today first-quarter gross domestic product rose 1.54 percent from a year earlier, less than half the 3.72 percent median forecast in a Bloomberg survey.

“Money keeps going into Asian regions like Taiwan,” said Frances Cheung, a Hong Kong-based strategist at Credit Agricole CIB. “There’s not much potential for the currency to strengthen further if Taiwan wants to retain its export competitiveness.”

The Taiwan dollar advanced 0.9 percent this month to NT$29.616 against its U.S. counterpart, Taipei Forex Inc. prices show. The currency was little changed today in Taipei and touched NT$29.42, the strongest level since Jan. 28.

The local dollar was trading 0.3 percent stronger one minute before the close. The central bank has sold the currency in the run-up to the close on most days in the past year, according to traders who asked not to be identified.

Bonds Rally

One-month non-deliverable forwards for the Taiwan dollar rose 1 percent in April and dropped 0.2 percent today to NT$29.513 against the greenback, according to data compiled by Bloomberg. One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, climbed 20 basis points, or 0.2 percentage point, to 3.65 percent from the end of March.

The yield on the 0.875 percent bonds due January 2018, the most-traded security today, fell 12 basis points to 0.896 percent this month, according to Gretai Securities Market prices. That’s the biggest monthly decline in benchmark five-year yields since August 2011.

The rate on the 1.125 percent notes due March 2023 fell four basis points to 1.19 percent, the lowest since Feb. 1.

The overnight interbank lending rate was little changed at 0.388 percent, according to a weighted average compiled by the Taiwan Interbank Money Center.

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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