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NT dollar enjoys biggest weekly gain since March

FOREIGN EXCHANGE Although the NT dollar on Friday pared its solid advance for the week, it contributed to regional currency strength, an IDEAglobal analyst said

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The New Taiwan dollar had the biggest weekly gain against the greenback in eight months on speculation governments around the world will provide further support measures to stem the deepening global economic slump.

The NT dollar gained 1.2 percent this week after the IMF said it has sufficient money available to meet current demand for loans from member nations. US Federal Reserve Chairman Ben Bernanke signaled he’s ready to cut the benchmark interest rate to the lowest level on record, after a half-point reduction to 1 percent.

“There were a number of factors which contributed to the regional currency strength, including the Taiwan dollar,” said Maya Pinto, an economist at IDEAglobal in Singapore. “A combination of things helped in curbing risk aversion. We think volatility and aversion will still be around and we expect to see currency weakness re-emerge”

Taiwan’s currency weakened 0.6 percent to NT$33 against the US dollar as of the 4pm close on Friday, paring the weekly advance, Taipei Forex Inc said. The weekly gain is the steepest since the week ended March 1.

Taiwan’s 10-year government bonds were little changed. The yield on the benchmark 2.125 percent bond maturing September 2018 climbed 0.3 basis point for the week to 1.977 percent, according to the GRETAI Securities Market, Taiwan’s biggest exchange for bonds. Its price fell 0.0307, or NT$30.7 per NT$100,000 face amount, to 101.3109. A basis point is 0.01 percentage point.

The central bank reduced the discount rate on 10-day loans to banks to 3 percent from 3.25 percent effective immediately, bank Governor Perng Fai-nan (彭淮南) said in a press conference in Taipei on Thursday.

The MSCI Asia-Pacific Index of regional stocks dropped as much as 2.5 percent on Friday, snapping a three-day rally, after the US reported the largest drop in GDP since 2001. Eight of the most active Asian currencies outside of Japan fell.

Indonesia’s rupiah completed its worst month since 1998 as overseas investors sold more Indonesian shares than they bought.

The rupiah fell 2.5 percent on Friday to 10,975 per dollar in Jakarta, Bloomberg data show. The currency slumped 13 percent last month.

Non-deliverable forwards contracts show traders are betting the rupiah will weaken 7 percent to 11,800 in a month, compared with 11,475 on Thursday.

The yen rose against the euro on Friday as signs of a global recession prompted investors to sell higher-yielding assets funded by low-cost loans in Japan.

Japan’s currency also advanced against the Australian and New Zealand dollars as commodities including gold and copper fell.

“Investors had positions using the dollar or yen to invest in the euro or emerging-market currencies,” said Masataka Horii, one of four investors for the US$47.9 billion Kokusai Global Sovereign Open fund in Tokyo, the biggest bond fund in Asia. “Now people are rushing to close that position.”

The yen climbed to ¥123.9 per euro in Tokyo on Friday from ¥127.31 on Thursday in New York. Against the dollar, it was at ¥97.01, from ¥98.61.

South Korea’s currency dropped for the first time in three days after manufacturers’ confidence tumbled to a record low and factory output fell for a third month, adding to concern the economy may sink into its first recession since needing an IMF bailout in 1997.

The won weakened 3.2 percent to 1,291 per dollar, Seoul Money Brokerage Services Ltd said.

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