Taiwan dollar rallies in April on yuan bets, trade deal

Saturday, May 1, 2010

TAIPEI, Taiwan -- Taiwan's dollar had its biggest monthly gain since September on speculation a possible yuan appreciation and a planned trade accord with China will help attract funds to the island's assets.

China will allow the yuan to strengthen this year, according to all 19 analysts surveyed by Bloomberg News earlier this month. Overseas investors added about US$4.4 billion to their Taiwan share holdings so far in 2010 to benefit from a planned trade agreement with China that'll lower import tariffs. The mainland is Taiwan's biggest trading partner. Government bonds were little changed.

“Foreign investors have every reason to send in funds, as there'll be more gains for the Taiwan dollar if the yuan rises” and because of the trade agreement, said Henry Lin, a currency trader at Taiwan Shin Kong Commercial Bank in Taipei. “The central bank may be stalling it, but the inflows are too big.”

The local dollar advanced 0.1 percent to NT$31.418 against its U.S. counterpart as of the 4 p.m. close local time, according to Taipei Forex Inc. It reached NT$31.269 on April 27, the highest level since August 2008 and climbed 1.3 percent this month.

The Central Bank of the Republic of China (Taiwan) bought the greenback in late trading on Aug. 27 and Aug. 28 to slow the Taiwan dollar's gains, according to traders, who declined to be identified.

The central bank will “maintain order in the foreign-exchange market” if “irregular factors cause large fluctuations,” it said in Taipei after the latest quarterly policy meeting on March 25.

The yield on Taiwan's 0.875 percent bond maturing in January 2015 was little changed at 1 percent, according to Gretai Securities Market, Taiwan's biggest exchange for bonds. Its price climbed 0.0161, or NT$16.1 per NT$100,000 face amount, to 99.4247. A basis point is 0.01 percentage point.

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