Taiwan Dollar Rises Most Since 2011 on Yuan, China Stimulus Bets

  • Global funds net buyers of Taiwan shares Monday: exchange data
  • Yuan advanced most since March as PBOC boosted fixing

Taiwan’s dollar jumped the most in more than four years, tracking gains in the yuan as China, the island’s largest export market, signaled support for its currency and the greenback retreated.

Speculation that the People’s Bank of China will reduce interest rates or reserve-requirement ratios has increased before data this week that will likely show slowing exports and inflation. The yuan climbed the most since March amid speculation major lenders were selling dollars to prop up the exchange rate. A gauge of the U.S. dollar slipped to a three-week low, shrugging off comments from Federal Reserve officials that the central bank is poised to raise borrowing costs this year.

“The yuan is stabilizing and the PBOC is loosening monetary conditions,” said Samson Tu, a fund manager at Uni-President Asset Management Corp. in Taipei. “The U.S. dollar has weakened so there might be some funds entering to bet on short-term Taiwan dollar appreciation.”

Taiwan’s currency strengthened 0.9 percent, the most since January 2011, to NT$32.560 against the greenback, Taipei Forex Inc. prices show. It advanced to NT$32.315 earlier, the strongest level since Sept. 1.

Taiwan’s central bank is monitoring whether hot money is entering the local bond market to speculate on the currency, Apple Daily reported without saying where it got the information. The island restricts foreign investors’ holdings of local-currency bonds, money-market instruments and derivatives to curb exchange-rate speculation.

Taiwan’s 2020 government bonds fell, with the yield climbing two basis points to 0.845 percent, Taipei Exchange prices show. That’s the highest close since Oct. 1. The government sold NT$35 billion ($1.1 billion) of the five-year notes at 0.845 percent on Monday, compared with the 0.83 percent median estimate in a Bloomberg survey.

Global funds bought $271 million more Taiwan shares than they sold on Monday, preliminary exchange data show. That’d be the highest inflow since Sept. 17. The benchmark Taiex index of shares jumped 1.5 percent.

Before it's here, it's on the Bloomberg Terminal.