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New Taiwan dollar leads region's currencies higher

The New Taiwan dollar led Asian currencies higher this week on speculation the region's central banks will allow faster gains to curb inflation.

The NT dollar on Friday had the highest close since May 2006 after a government report on Thursday showed faster-than-expected economic growth is driving up consumer prices. The local dollar has risen 3 percent this year, the best performer among the 10 most-active Asian currencies outside Japan. The Singapore dollar appreciated to a decade-high.

"The Taiwan dollar obviously is in an uptrend amid hopes for a better economic outlook and improving ties with China," said Tommy Huang, a bond trader at Taiwan International Securities Corp (金鼎證券) in Taipei.

The currency advanced 0.8 percent in the five-day period to NT$31.495, the sixth weekly gain, Taipei Forex Inc said. The Singapore dollar strengthened 0.5 percent to S$1.4063 while China's yuan rose 0.6 percent to 7.1418. Thailand's baht gained 0.7 percent to 32.31 onshore.

Central banks in Taiwan, China, Thailand, Malaysia and Singapore will allow their currencies to strengthen to cool inflation, said Pacific Investment Management Co, which oversees the world's biggest managed bond fund, and Pictet & Cie, Switzerland's largest closely held private bank.

"Asian countries such as China and Singapore are trying to control faster inflation and have more room to accept a stronger currency," said Masashi Kurabe, head of the foreign-exchange sales and trading group at Bank of Tokyo-Mitsubishi UFJ Ltd in Hong Kong. "Economic fundamentals are also much better than the US."

Taiwan's dollar may reach NT$31 in a month, Kurabe said.

The government on Thursday raised its inflation forecast for this year to 1.98 percent from a November prediction of 1.84 percent. The central bank on Friday denied a report in the Chinese-language Economic Daily News report that cited Governor Perng Fai-nan (彭淮南) as saying recent currency appreciation has helped curb inflation.

Exports to China helped Taiwan's economy expand 6.39 percent in the fourth quarter from a year earlier, beating the median estimate of 5.65 percent in a Bloomberg News survey. Exports to China and Hong Kong increased 12.6 percent last year.

The Taiwan dollar pared its advance of as much as 0.7 percent on Friday to 0.1 percent on speculation the central bank sold the currency.

"The central bank seems to have come into the market closer to the end of trading session as they care about the closing price," said Sadaaki Kondou, assistant general manager of treasury at Mizuho Corporate Bank Ltd(日商瑞穗實業銀行) in Taipei. "The basic trend is for the currency to appreciate but we can't ignore the possibility of intervention."

The Singapore dollar rose to a decade high as the central bank allows "slightly" faster appreciation to lower import prices and curb inflation.

Singapore's dollar advanced to S$1.4059, the highest since February 1997. Singapore's central bank seeks to keep its dollar from rising or falling outside of the band.

The South Korean currency has dropped 1.3 percent this year. Overseas fund managers sold stocks every day this year except four. The nation's benchmark stock index fell 1.1 percent on Friday.

The won declined 0.4 percent this week to 948.55 against the dollar, Seoul Money Brokerage Services Ltd said. That was the biggest loss since the week ended Jan. 25.

The Malaysian ringgit gained 0.2 percent this week to 3.2160, while Vietnam's dong added 0.1 percent to 15,944 per US dollar. The Indonesian rupiah was little changed for the week at 9,172.
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