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Taiwan Dollar Snaps 3-Day Drop on Stimulus Optimism; Bonds Gain

May 27 (Bloomberg) -- The Taiwan dollar climbed, halting a three-day decline, on speculation policy makers will act this week to spur the economy after the government lowered its 2013 growth forecast. Government bonds rose.

Stimulus measures may include steering life insurance funds to public construction projects, the Commercial Times reported, citing officials. The economy grew 1.67 percent in the first quarter from a year earlier, the statistics bureau said on May 24 while cutting its 2013 estimate to 2.4 percent from 3.59 percent. The U.S. dollar’s strength has contributed to a weakening of Asian currencies, and the Taiwan dollar and Thai baht are most at risk, Societe Generale wrote in a note.

“There’s some optimism the Taiwan government may announce an economic stimulus plan this week following the sharp downside growth revision,” said Wee-Khoon Chong, a strategist at Societe Generale SA in Hong Kong. “The local dollar’s strength is unlikely to be long-lasting amidst weakening Asia currency pressure across the region.”

The Taiwan dollar rose 0.2 percent to NT$29.97 against the greenback, show prices from Taipei Forex Inc. One-month implied volatility, a measure of expected moves in the exchange rate used to price options, climbed eight basis points, or 0.08 percentage point, to 5.01 percent.

The yield on the 1.125 percent government bonds due March 2023 fell one basis point to 1.288 percent, according to Gretai Securities Market.

To contact the reporter on this story: Kyoungwha Kim in Singapore at kkim19@bloomberg.net

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

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