Taiwan dollar climbs to 11-month high as equity inflows quicken

[HONG KONG] Taiwan's dollar rose to the strongest level since August as foreign funds poured cash into local equities amid confidence the Federal Reserve will keep interest rates on hold.

Global funds have injected a net US$1.2 billion into the territory's stocks this week through Wednesday, the most among eight Asian markets tracked by Bloomberg. Developing-nation currencies are recovering this month after plunging in the aftermath of the UK's vote to leave the European Union in June. Futures are now pricing in less than even odds of a Fed rate increase in 2016.

"The market thought that, after Brexit, funds would leave Europe and go to the US, but it seems some are entering emerging markets because US rate hikes will be delayed," said Cary Ku, an economist at Jih Sun Securities in Taipei. "Taiwan stocks' higher yield also attracts foreign investors."

Taiwan's dollar advanced 0.4 per cent to TW$32.070 against the greenback as of 12.31pm local time, after earlier reaching TW$32.058, the strongest level since Aug 13 last year, Taipei Forex prices show.

The Taiex index of shares rose 0.1 per cent, poised for the highest close since July. The gauge's 4.13 per cent dividend yield is the second-highest among benchmarks in Asia.

The central bank's foreign-exchange operations do not show a bias for depreciation, it said in a statement on Wednesday in response to media reports. The US put Taiwan on a watchlist for currency policies in April, arguing that the island mainly intervenes to block appreciation.

BLOOMBERG