Taiwan Dollar Advances Most in Two Weeks on China Factory Data

Taiwan’s dollar strengthened the most in two weeks as stocks rallied and a factory gauge in China, the island’s biggest export market, beat forecasts.

The Taiex index of shares jumped 1.2 percent to close near its highest level in almost three years. Overseas investors pumped $356 million into local equities this week, taking inflows this quarter to $3.7 billion, exchange data show. China’s Purchasing Managers’ Index for manufacturing rose to a five-month high of 49.7 in May, exceeding the 48.3 estimated in a Bloomberg survey, according to a preliminary report released today by HSBC Holdings Plc and Markit Economics.

“There may be foreign funds coming in as it looks like Taiwan’s stocks may rise further,’” said Tarsicio Tong, a Taipei-based currency trader at Union Bank of Taiwan. “The Chinese PMI that just came out was also quite good.”

Taiwan’s currency appreciated 0.1 percent to NT$30.178 against its U.S. counterpart, according to prices from Taipei Forex Inc. The local dollar slipped 0.1 percent in the last 11 minutes of trading amid suspected central bank intervention.

One-month non-deliverable forwards rose 0.2 percent to NT$30.112 against the greenback, according to data compiled by Bloomberg. One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, dropped three basis points, or 0.03 percentage point, to 3.14 percent.

Bonds Decline

Ten-year government bonds snapped a six-day gain, with the yield on the 1.5 percent notes due March 2024 rising three basis points to 1.4966 percent, according to prices from GreTai Securities Market. That’s the biggest increase since March 25.

Taiwan will sell NT$30 billion ($995 million) of 30-year securities at 2.05 percent tomorrow, according to the median estimate in a Bloomberg News survey of 11 fixed-income traders.

Taiwan’s bonds fell today because of the drop in U.S. Treasuries, said Aaron Chien, a Taipei-based debt trader at Taishin International Bank. The rate on 10-year U.S. sovereign notes climbed two basis points today as improved Chinese economic data curbed demand for the relative safety of government bonds. The yield rose two basis points yesterday.