Taiwan dollar rises on optimism over China ties

Eight out of Asia's 10-most active currencies advanced and the MSCI Asia Pacific Index of regional shares climbed to an eight-week high after the U.S. Federal Reserve Tuesday pledged to keep borrowing costs near zero for an “extended period.” Taiwan's Vice President Vincent Siew Tuesday said the island will sign a trade agreement with China in the “near future.”

“The improving relationship with China is one of the biggest factors for Taiwan and that puts pressure on the currency to rise,” said Minori Uchida, senior analyst at Bank of Tokyo Mitsubishi UFJ Ltd. in Tokyo, a unit of Japan's largest bank. “Inflow of funds into Taiwan, mainly through stocks, is boosting the currency.”

The local dollar rose 0.2 percent to NT$31.747 against the U.S. currency as of 4 p.m. local time, according to Taipei Forex Inc. It may advance to around NT$31.5 this month, Uchida said. The benchmark Taiex index of shares rose 2 percent, the biggest gain since Feb. 9.

The currency touched NT$31.703 earlier, the highest level since Feb. 6. The island had US$2.45 billion of foreign inflows in the year to March 15, central bank Governor Perng Fai-nan told lawmakers in Taipei yesterday.

The bank is closely monitoring the inflows, Perng said, adding that the funds should be used for its stated purpose. The Central Bank of the Republic of China (Taiwan) Tuesday said it didn't signal any trading direction for the local dollar, according to an e-mailed statement.

The yield on the 1.375 percent bond maturing March 2020 was little changed at 1.43 percent, according to Gretai Securities Market, Taiwan's biggest exchange for bonds. Its price climbed 0.0068, or NT$6.8 per NT$100,000 face amount, to 99.5204. A basis point is 0.01 percentage point.

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