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Taiwan Dollar Has Best Week in 10 Months as Intervention Reduced

July 12 (Bloomberg) -- Taiwan’s dollar had the best week in 10 months after the central bank scaled back its intervention in the currency market. Government bonds rose.

Closing prices at 4 p.m. on the past four days were on average less than 0.1 percent weaker than levels about three minutes earlier, compared with 0.6 percent since the start of June, Taipei Forex Inc. prices show. The central bank has cut intervention, after having sold the local currency in the run-up to the close on most days for more than a year, according to traders who asked not to be identified. Asian currencies rose this week after Federal Reserve Chairman Ben S. Bernanke damped speculation a reduction in stimulus was imminent.

“In the past few days, the central bank has been more hands-off,” said Samson Tu, a Taipei-based fund manager at Uni-President Assets Management Corp., which oversees $700 million. “Bernanke kind of rolled back on what he said earlier and that helps rein in the strength of the greenback.”

The Taiwan dollar gained 1 percent this week and 0.1 percent today to NT$29.932 against its U.S. counterpart, Taipei Forex prices show.

The island is bracing for a direct hit by Typhoon Soulik today. While financial markets remain open, the government announced schools and offices closed after 2 p.m.

One-month non-deliverable forwards rose 0.9 percent during the five-day period and slipped 0.2 percent today to NT$29.890, data compiled by Bloomberg show. One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, fell 46 basis points from a week ago to 4.21 percent.

The yield on the 0.875 percent notes due January 2018 fell 11 basis points, or 0.11 percentage point, to 1.03 percent in Taipei, according to Gretai Securities Market.

The overnight interbank lending rate was steady 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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