The divergence is the latest sign of seemingly insatiable demand for the Taiwan dollar driven by speculation the authorities will allow it to appreciate to help advance trade talks with this US. That sentiment helped the local dollar post the biggest gain since 1988 on Monday. The rally also bolstered regional currencies including the Malaysian ringgit and Chinese yuan.
A Taiwan-dollar derivative that’s popular with the island’s largest life insurers is pointing to further gains for the currency, even after a surge of as much as 5% Monday to a three-year high.
The spread between the spot rate and one-year non-deliverable forwards on the Taiwan dollar-US dollar currency pair swelled to around 3,000 pips at one point on Monday, the widest level in at least two decades, according to data compiled by Bloomberg.
