The New Taiwan dollar rose to a 13-year high on speculation the strongest economic growth in Asia will attract more overseas funds to the country’s assets.
The currency trimmed gains in the last minutes of trading on suspected intervention by the central bank, according to two traders who declined to be identified as the authority doesn’t usually disclose such details.
Banks’ holdings of non--deliverable forwards (NDF) and options in the NT dollar will be limited to 20 percent of their positions from about 33 percent previously, -according to an e-mailed statement late on Monday.
“I don’t think the new rules will really affect the [New] Taiwan dollar,” said Pin Ru Tan, a strategist at Royal Bank of Scotland Group in Singapore.
“Investors can still do NDFs trading offshore without restrictions,” Pin said. “The fact the central bank chose to do this instead of reining in the domestic market shows the authority doesn’t dare go that harsh.”
The NT dollar closed 0.1 percent stronger at NT$30.396 against its US counterpart, according to Taipei Forex Inc.
It earlier touched NT$29.445, the strongest level since October 1997.
The NT dollar has appreciated 5.9 percent this quarter, the best performance in Asia, and is up 8.5 percent for the year.
The country’s economy expanded 9.8 percent in the third quarter from a year earlier, the fastest growth among Asia’s 10 biggest economies.
Overseas investors have poured a net US$9.2 billion into local shares over this year, according to data from the Taiwan Stock Exchange.
Government bonds dropped, pushing the yield on the -benchmark 10-year bond to the highest level since July last year, before the central bank meets to decide on interest rates tomorrow.
Policy makers will increase the discount rate by 12.5 basis points to 1.625 percent, according to all 14 economists in a Bloomberg survey.
The yield on the 1.125 percent note due in September 2020 rose one basis point to 1.579 percent, according to GRETAI Securities Market, the country’s biggest debt exchange.
A basis point is 0.01 percentage point.
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