Taiwan Dollar Rises for Third Day as Stocks Climb; Bonds Drop

By David Yong and Yu-huay Sun

Dec. 9 (Bloomberg) -- Taiwan’s dollar rose for a third day as Asian stocks extended gains and overseas investors bought the island’s shares. Bonds declined.

The currency traded near a one-week high on speculation that pledges by the U.S. and India to increase public spending will raise investor confidence in emerging markets. Taiwan’s Taiex index climbed 2 percent, while funds abroad purchased more shares than they sold yesterday, ending four days of net sales.

“The gain is related to the stock rally and we see some foreign banks bidding for the local dollar at stronger levels today,” said Michael Lin, a currency trader at Bank Sinopac in Taipei.

The currency rose 0.1 percent to NT$33.473 per U.S. dollar as of 11:27 a.m. local time, according to Taipei Forex Inc. It reached NT$33.460, the highest level since Dec. 3. “It could go to NT$33.400 today or tomorrow.”

The MSCI Asia Pacific Index of regional stocks rallied for a third day after President-elect Barack Obama said on Dec. 6 he will boost investments in roads, bridges and buildings to create jobs. India at the weekend unveiled a 200 billion rupee ($4 billion) stimulus package that includes tax cuts.

Gains in the Taiwan dollar may be limited as a private report today indicated local employers will trim jobs in the first quarter of next year and a statistics office report yesterday showed exports plunged 23.3 percent last month, the worst in seven years.

Bonds Drop

Ten-year government bond yields climbed to the highest in eight days on speculation gains in stocks lured investors away from the safest debt.

Taiwan’s central bank may cut interest rates again this week to help stimulate the economy, a decision that can further buoy stock prices, said Sam Chang of Polaris Securities Co.

“Bond yields will be rebounding if rate cuts lift stocks,” said Chang, a debt trader in Taipei. “Traders will be more careful in what they do in the bond market over the short term.”

The yield on the 2.125 percent bond maturing September 2018 rose 2.6 basis points to 1.534 percent, according to Gretai Securities Market, Taiwan’s biggest exchange for bonds. The price dropped 0.2268, or NT$226.8 per NT$100,000 face amount, to 105.3486. A basis point is 0.01 percentage point.

The Central Bank of the Republic of China (Taiwan) has lowered its benchmark discount rate on 10-day loans four times since September to 2.75 percent from 3.625 percent. The monetary authority will meet on Dec. 11.

To contact the reporters on this story: David Yong in Singapore at dyong@bloomberg.net; Yu-huay Sun in Taipei ysun7@bloomberg.net.