Taiwan Dollar Completes Best Week Since 2012 on China Rebound

  • Foreign funds pump most money into island's stocks since May
  • China, Taiwan's top export market, seen easing to spur growth

Taiwan’s dollar recorded its biggest weekly gain since 2012 as foreign funds snapped up the island’s shares amid signs the U.S. won’t raise interest rates this year and China will step up measures to spur growth.

Overseas investors bought a net $813 million of Taiwanese stocks this week, the biggest inflow since May. Shanghai equities had their best week in four months on speculation the central bank will ease monetary policy further after announcing an expanded relending program to boost credit. A gauge of dollar strength fell this week as U.S. data on retail sales, producer prices and inventories all missed estimates, undermining the case for monetary tightening in 2015.

“The market is now trading the theme of funds returning to emerging markets,” said Andrew Tsai, an economist at KGI Securities Co. in Taipei. "Expectations for a Fed rate hike are fading, so the dollar is weakening, and sentiment around China is turning both in terms of policy and markets."

Taiwan’s currency strengthened 1.1 percent this week, the most since September 2012, to close at NT$32.505 against the greenback, Taipei Forex Inc. prices show. The local dollar fell 0.2 percent on Friday as one-month non-deliverable forwards declined 0.8 percent.

The central bank’s first rate cut since 2009 last month stirred speculation it may ease again at its next meeting in December. A delay in U.S. tightening would make this easier for Taiwan as a wider gap in interest rates would risk excessive outflows.

“If the Fed doesn’t raise rates, Taiwan may cut rates again as the economy isn’t good,” said KGI’s Tsai. "Theoretically, the market should be trading this theme, but now it’s more about global fund flows."

Five-year government bonds rose this week, pushing the yield down two basis points to 0.803 percent, Taipei Exchange data show.

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