Taiwan’s Dollar Climbs Toward Three-Month High on Equity Inflows

Taiwan’s dollar advanced toward a three-month high after overseas investors boosted holdings of local stocks. Government bonds rose.

Foreign funds bought more Taiwanese equities than they sold on each of the past 11 trading days, injecting a total of $3 billion, as the Taiex index added 5 percent over the period. The island’s foreign reserves rose to $409.4 billion, the world’s fifth-largest, in August, data showed last week. Taiwan dollar forwards fell the most in three weeks yesterday as the ruling Kuomintang party revoked legislative speaker Wang Jin-pyng’s party membership and legislative seat on allegations he interfered with the judicial process.

“There’s some hot money flowing from countries like India to places with high foreign reserves like Taiwan and South Korea,” said Eric Hsing, a fixed-income trader at First Securities Inc. in Taipei. “But if the conflict between the legislative and executive branches affects any important economic legislations, the economy may be impacted.”

The Taiwan dollar gained 0.2 percent to NT$29.783, Taipei Forex Inc. prices show. The currency touched NT$29.651, just shy of the three-month high of NT$29.622 reached two days ago. It was trading 0.5 percent stronger five minutes before the 4 p.m. close today. The central bank has sold the local dollar in the run-up to the finish on most days since March 2012, according to traders who asked not to be identified.

Forwards, Bonds

One-month non-deliverable forwards rose 0.1 percent to NT$29.638 per U.S. dollar, according to data compiled by Bloomberg. One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, dropped six basis points, or 0.06 percentage point, to 4.10 percent.

The yield on Taiwan’s government bonds due September 2023 decreased two basis points to 1.7630 percent in when-issued trading, according to Gretai Securities Market. The notes are due to be officially auctioned on Sept. 14.

The overnight interbank lending rate was unchanged at 0.386 percent, a weighted average compiled by the Taiwan Interbank Money Center showed.

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