Taiwan Dollar Forwards Complete Best Week in a Month; Bonds Fall

Taiwan dollar forwards completed their biggest weekly gain in a month as a plan to cut taxes on stock investments attracted global funds to the island’s assets. Bonds fell.

Overseas funds bought $107 million more local shares than they sold in the week through yesterday, taking inflows this year to $4.9 billion, according to exchange data. The Taiex index of shares touched a 21-month high on May 22. Political parties now need to reach a consensus on the tax-reduction proposal before the bill’s second reading in parliament.

“Hot money is coming in,” said Tarsicio Tong, a currency trader at Union Bank of Taiwan in Taipei. “Foreign investors are interested in buying Taiwanese stocks because of the tax plan offering better prospects. I understand that the central bank wants to see stable foreign-exchange rates.”

One-month non-deliverable forwards for the Taiwan dollar advanced 0.6 percent against the greenback this week, the most since the week ended April 26, according to data compiled by Bloomberg. The contracts rose 0.3 percent today to NT$29.900.

The Taiwan dollar was little changed today and rose 0.1 percent this week to NT$30.03, show prices from Taipei Forex Inc. One-month implied volatility, a measure of expected moves in the exchange rate used to price options, fell 14 basis points, or 0.14 percentage point, to 4.98 percent.

If the bill is approved, the tax rate for investors with trading volumes of NT$1 billion ($33.4 million) or more will be lowered to 0.1 percent from 2.25 percent, while those with less than NT$1 billion will be exempt from any levy.

The yield on the 1.125 percent government bonds due March 2023 rose four basis points this week to 1.294 percent, according to Gretai Securities Market. It was down one basis point today.

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