Taiwan Dollar Gains Most in Week Since October on China Bets

Taiwan’s dollar recorded its biggest weekly gain since October on speculation the Chinese government will deploy stimulus to boost economic growth.

Manufacturing in China, the island’s largest export market, probably contracted for a third month in March, the final reading of a Purchasing Managers Index from HSBC Holdings Plc and Markit Economics may show on April 1, matching the preliminary 48.1 reported this week. The PMI prompted bets policy makers will take stimulus measures to support the economy, Dariusz Kowalczyk, a Hong Kong-based strategist at Credit Agricole CIB, wrote in a March 25 research note.

“Asian currencies have been rising since there’s been some support for risky assets,” said Frances Cheung, a Hong Kong-based strategist at Credit Agricole. “Investors were expecting Chinese growth to be weak, but now it looks like there may be support from some stimulus policies.”

Taiwan’s dollar climbed 0.3 percent this week and 0.1 percent today to NT$30.552, according to prices from Taipei Forex Inc. That’s the biggest five-day advance since Oct. 4. The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most-active currencies, jumped 0.5 percent from March 21, snapping a two-week decline.

One-month non-deliverable forwards strengthened 0.5 percent this week and 0.2 percent today to NT$30.465 against the greenback, data compiled by Bloomberg show.

Bonds Rise

Taiwan’s central bank held its benchmark interest rate at 1.875 percent yesterday, as predicted by all 22 economists surveyed by Bloomberg. While the global economy has been recovering, it may be affected by China’s slowdown and the Federal Reserve’s stimulus cuts, the monetary authority said in a statement yesterday.

“Perng’s remarks assuaged earlier fears that he might make hawkish comments,” said Max Liu, a bond trader at Capital Securities Corp. in Taipei, referring to the central bank governor Perng Fai-nan. “But he indicated there is no inflation concern.”

The yield on the 1 percent sovereign bonds due February 2019 fell one basis point this week and two basis points today to 1.093 percent, GreTai Securities Market prices show. Today’s drop is the biggest since Jan. 27.

Global funds bought $1 billion more Taiwanese equities than they sold this week, exchange data show. One-month implied volatility in the local currency, a gauge of expected moves in the exchange rate used to price options, slid 65 basis points this week and eight basis points today to 3.62 percent.

The overnight interbank lending rate was steady this week and today at 0.387 percent, a weighted average compiled by the Taiwan Interbank Money Center showed.

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