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Updated Wednesday, February 10, 2010 10:54 am TWN, Bloomberg

Taiwan Dollar Strengthens on Export Surge

TAIPEI, Taiwan -- Taiwan's dollar rose, rebounding from the year's low, on speculation exporters bought the currency before the weeklong Lunar New Year holidays and as overseas shipments surged. Bonds were little changed.

The island's dollar appreciated the most in four weeks after a government report issued late Monday showed exports climbed 75.8 percent in January, the biggest increase in more than 30 years. The central bank bought U.S. dollars Monday to cap strength in Taiwan's currency, according to three traders, who asked not to be identified.

“The trade figures are a factor that the central bank may ease its intervention on the Taiwan dollar,” said Lucas Lee, an economist at Mega Securities Co. in Taipei. “Exporters are dumping the U.S. dollar,”

The Taiwan dollar appreciated 0.3 percent to NT$32.100 against its U.S. counterpart as of the 4 p.m. close local time, according to Taipei Forex Inc. It was the biggest gain since Jan. 11. The local currency reached NT$32.22 Monday, the weakest level this year. Policy makers intervene in currency markets by arranging purchases or sales of foreign exchange.

Exporters need the local dollar to pay bonuses before the holiday that starts Feb. 13, Lee said.

The Taiwan dollar's exchange rate is determined by market supply and demand, and the monetary authority may step in if “irregular factors” cause excessive fluctuations, the Central Bank of the Republic of China (Taiwan) said after its last quarterly policy meeting on Dec. 24. The increase in overseas sales exceeded the median of five estimates in a Bloomberg News survey for a 62.9 percent gain and accelerated from a 46.9 percent pace in December. Imports advanced 114.7 percent for a trade surplus of $2.49 billion.

The yield on the 0.875 percent bond maturing January 2015 was little changed at 0.883 percent, according to Gretai Securities Market, Taiwan's biggest exchange for bonds. Its price rose 0.0085, or NT$8.5 per NT$100,000 face amount, to 99.9609. A basis point is 0.01 percentage point.

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