Taiwan Dollar Advances to One-Week High on Japan Stimulus Bet

Taiwan’s dollar rose to a one-week high on speculation Japanese policy makers will expand stimulus after Prime Minister Shinzo Abe urged the central bank to double its inflation goal, and as Chinese exports beat estimates.

Abe said yesterday the Bank of Japan should aim for 2 percent inflation. Global funds boosted holdings of Taiwan’s stocks by $4.9 billion in 2012, contributing to a 4 percent appreciation in the local dollar, as bond-buying programs in the U.S., Europe and Japan increased demand for emerging-market assets. Exports from China, Taiwan’s biggest trade partner, rose 14.1 percent in December, almost triple the 5 percent gain predicted in a Bloomberg analyst survey, data showed today.

“Japan boosting stimulus will flood markets like Taiwan and South Korea with money,” said Tarsicio Tong, a Taipei-based foreign-exchange trader at Union Bank of Taiwan. “Japan’s stimulus programs will further weaken the yen. Central banks in Asia will look at the yen closely to maintain their export competitiveness.”

The Taiwan dollar rose 0.1 percent to NT$29.088 against its U.S. counterpart, according to Taipei Forex Inc. It reached NT$28.979 earlier, the strongest level since Jan. 3.

Foreign investors boosted their holdings of Taiwan stocks for the first time in five days. Global funds bought $303 million more local equities than they sold today, exchange data show.

Bond Sale

Taiwan’s central bank has bought the greenback to counter appreciation in the island’s currency during the final minutes of trading on most days in the past nine months, according to traders who asked not to be identified. The monetary authority’s mandate is to keep relative exchange-rate stability and to intervene in the event of abnormal moves, Governor Perng Fai-Nan said Dec. 19.

One-month implied volatility in the Taiwan dollar, a gauge of expected moves in exchange rates used to price options, rose five basis points, or 0.05 percentage point, to 3.03 percent.

The yield on the 0.875 percent bonds due January 2018 was little changed at 0.909 percent after the government sold NT$40 billion ($1.4 billion) of five-year notes today at 0.911 percent, according to Gretai Securities Market. The overnight interbank lending rate was steady at 0.387 percent, a weighted average compiled by the Taiwan Interbank Money Center shows.

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