The Taiwan dollar strengthened for a second straight session on Thursday as domestic stocks rose and exporters bought the currency, while expectations of warmer relations with China also boosted investor confidence. But the central bank capped gains in the local currency with modest US dollars purchases, dealers in Taipei said.
The Taiwan dollar closed at T$30.456 to the US dollar, compared to the previous close of T$30.512. Volume on the main Taipei Forex Inc exchange was $1.141 billion, higher than $975 million a day earlier. Domestic inflation and its expected effect on interest rates have raised investor interest in the Taiwan dollar, a dealer said.
The government said it expected 2008 inflation of 3.29 percent year on year, up from a Reuters estimate of 1.98 percent. A meeting in Beijing on Wednesday between Taiwan ruling party Chairman Wu Poh-hsiung and Chinese President Hu Jintao followed by an agreement on Thursday to resume formal talks on a historic deal for direct flights and tourism also boosted investor confidence, he said. "It looks likes there's some substantive progress," he said.
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