Taiwan dollar advances for 5th week on inflows, China ties

The local currency Thursday reached its highest level in 18 months buoyed by inflows of foreign capital after Taiwan's Vice President Vincent Siew said the island will sign a trade agreement with China in the “near future.” Goldman Sachs Group Inc. yesterday raised its 12-month forecast for the local dollar to NT$30 from a previous estimate of NT$30.50.

The “central bank may allow the Taiwan dollar to appreciate a little because our connection with China is closer than ever,” according to Albert Lee, a fixed-income trader in Taipei at Cathay United Bank Co.

The local dollar climbed 0.1 percent to NT$31.799 against its U.S. counterpart as of 4 p.m. local time, according to Taipei Forex Inc. It strengthened 0.1 percent this week. The currency may advance to NT$31.5 over the next two weeks, Lee predicted.

Taiwan's dollar reached NT$31.667 Thursday, the highest level since September 2008, as global funds purchased US$420 million more local shares than they sold. Central Bank Governor Perng Fai-nan on March 17 said the island had US$2.45 billion of foreign-capital inflows in the year to March 15, and urged investors to ensure the money is used for its stated purpose.

The Central Bank of the Republic of China (Taiwan) is closely monitoring the inflows, Perng told lawmakers in Taipei. Flows into the 5,000 accounts held by foreign investors have totaled US$290 billion in the past 14 months, he said.

The central bank said on March 16 it didn't signal any trading direction for the local dollar, according to an e-mailed statement. Policy makers can try to influence exchange rates by arranging purchases or sales of currencies.

The “fundamentals supporting our positive Taiwan dollar stance to increase further, including cyclical recovery gaining traction and the central bank's likely increasing tolerance to Taiwan dollar strength,” Goldman's Hong Kong-based analysts Enoch Fung and Shirla Sum wrote in a research report to clients yesterday.

The central bank issued NT$58 billion of certificates of deposit Thursday, more than the NT$18.45 billion that matured, according to its Web site.

The yield on the 1.375 percent bond maturing March 2020 was little changed at 1.429 percent today, according to Gretai Securities Market, Taiwan's biggest exchange for bonds. The price fell 0.0038, or NT$3.8 per NT$100,000 face amount, to 99.4987. A basis point is 0.01 percentage point.

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