Taiwan Dollar Advances to 16-Month High on Export Growth Outlook

Taiwan’s dollar gained for a second week, touching a 16-month high today, on speculation demand for the island’s exports is improving as China’s economy recovers. Government bonds were little changed.

Overseas sales from China, Taiwan’s biggest trading partner, rose 14 percent from a year earlier in December, official data showed yesterday. That compared with a 2.9 percent increase in November. Chinese imports climbed 6 percent after staying at the same level the month before. The island’s exports jumped 9 percent last month, following a 0.9 percent increase in November, the government reported Jan. 7.

“Taiwan has the world’s biggest trade surplus with China, and it looks like demand from China’s really picking up,” said Frances Cheung, a strategist at Credit Agricole CIB in Hong Kong. “There’ll be appreciation pressure for the currency for the rest of the year, but the central bank will try to maintain its relative stability.”

The Taiwan dollar rose 0.3 percent this week to NT$29.039, against its U.S. counterpart, according to Taipei Forex Inc. The currency climbed 0.2 percent today and touched NT$28.930, the strongest level since Sept. 1, 2011. Global funds bought $106 million more local equities than they sold today, following net buying of $324 million yesterday, exchange data show.

Counter Appreciation

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 28 basis points, or 0.28 percentage point, during the five-day period to 3.35 percent. It gained 17 basis points today.

The yield on the 1.125 percent bonds due September 2022 was little changed this week and today at 1.171 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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