Taiwan Dollar's Advance to Two-Month High Prompts Intervention

  • Benchmark equity index climbs to highest since November
  • Currency may fall again as inflows start to weaken: Jih Sun

Taiwan’s dollar touched a two-month high as foreign funds poured into the island’s stock market amid increasing optimism over global growth, prompting the central bank to curb its gains.

The monetary authority intervened minutes before noon, according to two traders who asked not to be identified because they’re not authorized to speak publicly. Overseas investors bought a net $437 million of Taiwanese shares on Thursday, the most since Nov. 4, as the benchmark Taiex index rose to the highest in almost four months.

Taiwan’s dollar rose 0.6 percent to close at NT$33.179 against the greenback, according to Taipei Forex Inc. prices. The currency earlier reached NT$32.954, the strongest since Jan. 4. The spot rate retreated 0.4 percent in two minutes of trading before the midday break. The authority, which intervenes almost every day near the close, has also occasionally stepped in at noon.

“The good performance in stocks is attracting foreign funds, but this is a short-term fund movement,” said Cary Ku, an economist at Jih Sun Securities Co. in Taipei. “The economic fundamentals and growth don’t support further appreciation.”

The Taiex rose 0.8 percent to 8,611.79 on Thursday. The yield on 2026 sovereign bonds was little changed at 0.84 percent.

The island’s currency may gradually depreciate after consolidating at around NT$33, according to Ku. Stock inflows may lose momentum as the Taiex approaches 8,600, Ku said.

Taiwan last month cut its economic growth forecast for 2016 as China’s slowdown weighed on export demand.

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