Taiwan dollar at 2-mth high

May 29 | Updated: May 30 2007, 05:30am hrs
Taiwans dollar climbed to a two-month high on speculation the central bank will buy the currency to curb declines after it fell to a 17-month low last week.

The currency has dropped 1.3% this year as interest rates among the lowest in Asia led investors to take funds out of the island to buy higher-yielding assets abroad.

Central bank buying has helped the Taiwan dollar rise 1% since May 22, when the currency touched the lowest since December 2005.

There remains strong speculation the central bank will come in again and again, pushing up the Taiwan dollar, said Sadaaki Kondou, assistant general manager of the Treasury department at Mizuho Corporate Bank Ltd in Taipei. The central bank probably doesnt like to see more fund outflows due to the rate disadvantage.

The Taiwan dollar climbed 0.4% to NT$33.019 against the US currency, after touching NT$32.985, the strongest since March 28, according to Taipei

The islands currency may rise to NT$32.95 this week, Kondou said. The islands dollar also gained for a fourth day on speculation the recent gains will encourage exporters to convert their overseas earnings before a further increase in the Taiwan currency cuts their local dollar-denominated profit.With such a fast pace of appreciation lately, the local exporters also seem to rush to buy the Taiwan dollar, Mizuhos Kondou said.

The South Korean won and Singapore dollar rose on speculation global funds were buying stocks as equity indexes climbed. Japan, the regions largest economy, showed an unexpected drop in unemployment and household spending increased for a fourth month.

Asian equity sentiment is looking pretty good and thats good for Asian currencies, said Sean Callow, a senior currency strategist at Westpac Banking Corp in Singapore. Even so, its relatively quiet, and there could be some choppy trade.

The Singapore dollar rose 0.1% to S$1.5282 and the Korean won gained 0.1%to 927.50. The ringgit weakened 0.2% to 3.3950.

Bloomberg