Taiwan Dollar Forwards Advance to One-Week High on Stock Inflows

Taiwan dollar forwards advanced to the strongest level in almost a week after foreign investors boosted holdings of local stocks on signs the island’s economy is improving. Government bonds were little changed.

Global funds bought $119 million more Taiwanese equities than they sold today, a third day of net purchases, according to stock exchange data. The statistics bureau in February raised its estimates for exports and gross domestic product in 2013. The central bank kept its benchmark interest rate at 1.875 percent on March 28 for a seventh straight meeting.

“There are some inflows into select dividend-paying stocks and I would say we are still in an early stage of economic recovery,” said Andrew Tsai, an economist at KGI Securities in Taipei.

One-month non-deliverable forwards rose 0.1 percent to NT$29.84 per dollar, according to data compiled by Bloomberg. They touched NT$29.795 earlier, the strongest level since March 27. The local dollar was little changed at NT$29.92, according to Taipei Forex Inc. It was trading 0.2 percent stronger one minute before the 4 p.m. finish.

The central bank has sold the local currency in the run-up to the close on most days in the past year, according to traders who asked not to be identified.

One-month implied volatility in the Taiwan dollar, a gauge of expected moves in the exchange rate used to price options, declined six basis points, or 0.06 percentage point, to 3.49 percent, according to data compiled by Bloomberg.

Manufacturing Growth

A gauge of manufacturing growth on the island rose to 51.2 last month from 50.2 in February, according to data published yesterday by HSBC Holdings Plc and Markit Economics. The statistics bureau raised its 2013 economic expansion forecast to 3.59 percent from 3.53 percent. Taiwan will allow mainland Chinese lenders to invest in local financial companies and markets, the Financial Supervisory Commission said yesterday.

The yield on the 1.125 percent bonds due March 2023 was 1.311 percent, compared with 1.315 percent yesterday, according to Gretai Securities Market. It reached 1.29 percent on March 28, the lowest since March 18.

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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