Taiwan Dollar Strengthens on China Growth Optimism; Bonds Steady

Taiwan’s dollar gained on speculation an economic rebound in China will boost demand for the island’s goods. Government bonds were little changed.

China, Taiwan’s biggest overseas market, may report tomorrow gross domestic product rose an annualized 7.8 percent in the three months through December, ending a seven-quarter slowdown, according to the median estimate in a Bloomberg survey. Analysts predict Taiwan’s export orders increased for a fourth month in December, a separate survey shows before data due Jan. 21.

“Taiwan stands to benefit most from the recovery in China and given the current momentum, there’s room for the currency to appreciate,” said Jackit Wong, a regional economist in Hong Kong at Natixis Asia Ltd. “The central bank may want to control the pace and keep the exchange rate stable.”

The local currency rose 0.1 percent to NT$29.085 per dollar, according to Taipei Forex Inc. It earlier rallied as much as 0.5 percent to NT$28.95. One-month non-deliverable forwards were steady at NT$28.94, according to data compiled by Bloomberg.

Export orders rose 9.11 percent in December from a year earlier, according to the median forecast in the survey, following an 11.1 percent gain in November. Other reports in the past month showed factory output and manufacturing expanded.

“The improvement in data reflects Taiwan’s close connection with China and forms a favorable environment for the Taiwan dollar,” according to a research note yesterday from HSBC Holdings Plc.

One-month implied volatility in the Taiwan dollar, a gauge of expected moves in the exchange rate used to price options, dropped to 3 percent from 3.16 percent, according to data compiled by Bloomberg.

The yield on the 1.125 percent government bonds due September 2022 was at 1.157 percent versus 1.162 percent yesterday, according to Gretai Securities Market. The overnight interbank lending rate was steady at 0.386 percent, a weighted average compiled by the Taiwan Interbank Money Center shows.

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