Azernews.Az

By Bloomberg

Taiwan’s dollar had its biggest weekly gain in two months on speculation faster economic growth and a weaker greenback will attract inflows.

The island’s economy will expand 3.78 percent this year, the government forecasts, which would be the fastest pace since 2011. A gauge of dollar strength dropped for a second week after the Federal Open Market Committee pushed back its forecasts for when U.S. borrowing costs will be raised. Taiwan’s currency advanced even as foreign funds pulled $1 billion from local stocks this week, the most since December.

“The dollar has been falling because the FOMC seems indecisive” over raising rates, said Cary Ku, an economist at Jih Sun Securities Co. in Taipei. “Taiwan’s economy has been more stable” and the fact that the island’s dollar advanced amid the share outflows may mean the funds will be reinvested locally, he said.

Taiwan’s dollar strengthened 0.6 percent from March 20 and 0.1 percent on Friday to NT$31.375 against the greenback, Taipei Forex Inc. prices show. That’s the biggest weekly advance since the period ending Jan. 24. One-month non-deliverable forwards rose 0.4 percent this week to NT$31.239, according to data compiled by Bloomberg. The contracts were steady from Thursday.

Consumer prices fell in January and February, while core inflation reached a two-year high of 1.78 percent last month, official data show. M2 money supply grew 6.51 percent in February, the fastest pace since November 2009.

Looser Policy

Taiwan’s central bank kept its benchmark discount rate at 1.875 percent for a 15th quarter on Thursday, as predicted by 21 of 22 economists surveyed by Bloomberg. One forecast a cut to 1.75 percent. Governor Perng Fai-nan said monetary policy has loosened from the end of last year, while adding that Taiwan isn’t experiencing deflation.

Sovereign bonds rose this week, pushing the yield on the notes due March 2020 down three basis points, or 0.03 percentage point, to 1.01 percent, Taipei Exchange prices show. The yield rose one basis point on Friday. The yield on five-year Treasuries jumped nine basis points to 1.46 percent in the two days through Thursday.

While Taiwan’s bonds dropped following Treasuries, the decline was capped by the central bank’s comments, according to J. J. Yeh, a bond trader at Waterland Securities Co.

“The central bank may keep rates unchanged, but it’s loosening monetary conditions,” Yeh said.