Taiwan’s Forwards Gain Most in Two Months on China Factory Data

Taiwan dollar forwards rose the most in more than two months as a jump in China’s manufacturing gauge signaled a recovery in the world’s second-largest economy.

The Purchasing Managers’ Index in Taiwan’s biggest export market advanced to a 16-month high of 51 in August, official data showed yesterday, prompting JPMorgan Chase & Co. to join Deutsche Bank AG and Credit Suisse Group AG in raising growth estimates for China’s economy. Taiwan had $409 billion in foreign reserves, the third-largest in Asia, as of July 31, data compiled by Bloomberg show.

One-month non-deliverable forwards increased 0.7 percent, the most since June 25, to NT$29.705 per U.S. dollar as of 4:20 p.m. in Taipei, according to data compiled by Bloomberg. They touched NT$29.685 earlier, the strongest level since June 7.

“China’s PMI had an impact to some extent, and now as many Asian currencies depreciate, we see currencies of countries with large foreign reserves like South Korea, Singapore and Taiwan have been stronger,” said Samson Tu, a Taipei-based fund manager at Uni-President Assets Management Corp.

In the spot market, the local dollar strengthened 0.3 percent to NT$29.900 against the greenback, Taipei Forex Inc. prices show. It was trading 0.5 percent stronger three minutes before the 4 p.m. close today. The central bank has sold the currency in the run-up to the close on most days since March 2012, according to traders who asked not to be identified.

One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, rose 11 basis points to 3.84 percent. The overnight interbank lending rate was little changed today at 0.385 percent, a weighted average compiled by the Taiwan Interbank Money Center showed.

Taiwan’s Manufacturing Purchasing Managers’ Index rose to 50 in August, up from 48.6 in July, according to HSBC Holdings Plc and Markit data released today.

The yield on government bonds due September 2023, which will be sold at an auction on Sept. 14, dropped one basis point to 1.72 percent in when-issued trading that began last week.

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