Taiwan Dollar Forwards Rise to One-Month High on Growth Signs

Taiwan’s dollar forwards climbed to the strongest level in almost a month after manufacturing data signaled a sustained economic recovery and the Federal Reserve eased concern it will raise rates sooner than expected.

The currency’s spot rate rose for the eighth day, the longest streak since 2010, after a gauge from HSBC Holdings Plc and Markit Economics showed Taiwan’s factory output expanded for the eighth month. Fed Chair Janet Yellen said this week the U.S. economy will need support for “some time.” She earlier fueled speculation the central bank may raise borrowing costs earlier than expected when she said the federal funds rate may increase about six months after the stimulus ends.

“Taiwan’s economic fundamentals seem to have improved,” said Michelle Tsai, a Taipei-based economist at Jih Sun Securities Co. “Asian currencies also rebounded after Yellen put out the fire by signaling interest rates may not rise as early as expected.”

One-month non-deliverable forwards strengthened 0.2 percent to NT$30.266 against the greenback as of 4:28 p.m. in Taipei, according to data compiled by Bloomberg. The contracts touched NT$30.226, the strongest level since March 7.

Taiwan’s dollar rose 0.2 percent to NT$30.375 against its U.S. counterpart, according to prices from Taipei Forex Inc, after touching a three-week high of NT$30.255. One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, fell three basis points, or 0.03 percentage point, to 3.52 percent.

PMI, Bonds

The Purchasing Managers’ Index of Taiwan manufacturing was 52.7 in March, compared with 54.7 in the previous month, HSBC and Markit Economics reported yesterday. That’s above the 50 level that divides expansion from contraction.

Taiwan’s 10-year sovereign bonds fell for a third day, as the yield on the 1.5 percent notes due March 2024 rose one basis point to 1.612 percent, according to prices from Gretai Securities Market. That’s the highest level since March 25.

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

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