The New Taiwan dollar strengthened as stock gains fueled optimism that overseas funds would add to their holdings of local shares as risk appetite increases.
The local currency advanced as the benchmark TAIEX extended a seven-week rally, rising 1.3 percent yesterday. The MSCI Asia Pacific index jumped as much as 0.9 percent after the Standard & Poor’s 500 index climbed 3.8 percent on Friday. Foreign investors bought US$804 million more Taiwanese shares than they sold this month, stock exchange data showed.
“The [New] Taiwan dollar is stronger this morning due to the stock market which has gained quite a bit,” said Henry Lin, a foreign-exchange trader at Shin Kong Commercial Bank (新光商銀) in Taipei. “Investors are also taking their cues from US stocks.”
The local currency rose 0.3 percent to NT$33.680 against the greenback as of 3:04pm, according to Taipei Forex Inc. The currency fell last week on speculation the central bank intervened to stem gains.
“The central bank has not been in the market so far this morning but it could come in the afternoon,” Lin said. “The central bank doesn’t want the Taiwan dollar to appreciate too much.”
The central bank warned local banks last Tuesday not to speculate on gains in the NT dollar, the Chinese-language Commercial Times reported on Wednesday, citing unidentified traders.
The local currency also strengthened on optimism of improved cross-strait relations.
Taiwan plans to propose to China that they start talks on cross-strait economic cooperation at the end of this year, Chao Chien-min (趙建民), deputy chairman of the Mainland Affairs Council said yesterday.
“The government’s policy to improve Taiwan’s relations with China is also helping sentiment in the market,” Lin said.
China and Taiwan took another step toward free conversion of their currencies after the People’s Bank of China agreed to buy back the yuan in Taiwan, the Chinese-language Economic Daily News reported yesterday, citing an unidentified official.
The two sides may use the Bank of China Ltd (中國工商銀行) and the Bank of Taiwan (台灣銀行) for settlement, the report said.