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Taiwan dollar gains on Obama stimulus pledge

TAIWAN dollar

Taiwan dollar gains on Obama stimulus pledge

Taiwan's dollar rose the most in almost four weeks after U.S. President Barack Obama called for tax cuts to stimulate the economy and create jobs. Bonds were little changed.
The Federal Reserve yesterday pledged to keep interest rates near zero for an "extended period" and said the U.S. economy, the world's biggest, "has continued to strengthen." Taiwan's central bank reiterated yesterday that inflows of funds must be used for their reported purpose and not to speculate on the local currency, which has strengthened 1 percent in the past month.
"There's been some positive investor reaction to the FOMC and Obama's state of the union speech," said Patrick Bennett, a foreign-exchange strategist at Societe Generale SA in Hong Kong. "If appreciation is linked to actual investment in Taiwan's economy then I think it'll be allowed. The central bank is happy for investors to put money into the economy but don't want it to be parked in short-term bills and money markets."
The local dollar rose 0.3 percent to NT$31.975 versus the greenback as of 12:51 p.m. local time, headed for the biggest gain since Jan. 4, according to Taipei Forex Inc. It earlier reached NT$32.10, the weakest level since Jan. 4. The Taiex index climbed 2.5 percent, after eight days of losses.
Taiwan might find it difficult to reach its goal of signing a trade agreement with China by June because of local opposition to the deal, Lin Sheng-chung, deputy minister of the island's Ministry of Economic Affairs, said yesterday.
Improving economy
The two sides this week held the first talks on a proposed Economic Cooperation Framework Agreement aimed at strengthening trade and investment ties. Taiwan and China have agreed the pact would include trade of goods and services, as well as a so- called "early harvest list" of industries that would be the first to enjoy lower tariffs, the Straits Exchange Foundation said on Tuesday.
"The improvement in relations between Taiwan and mainland China are medium and long-term positive for Taiwan assets and the currency," SocGen's Bennett said. "It'll be one of the top performing currencies in Asia this year."
The Taiwan dollar may reach NT$30.649 in the fourth quarter of this year as the economy recovers, David Hong, president of the Taiwan Institute of Economic Research, said this week in Taipei. The private think-tank raised its 2010 economic growth forecast to 4.81 percent from 4.21 percent, citing a recovery in private sector investment and consumption.
The yield on Taiwan's 0.875 percent bond due January 2015 was 0.89 percent, little changed from yesterday, according to Gretai Securities Market, Taiwan's biggest exchange for bonds. The price fell 0.0207, or NT$20.7 per NT$100,000 face amount, to 99.9203. A basis point is 0.01 percentage point.