The Taiwan dollar rose to its strongest level in almost three months after overseas investors boosted holdings of the island's stocks amid optimism a global economic recovery was gathering pace.
International funds bought more Taiwanese equities than they sold in the past four days, bringing net purchases to US$557 million. The stock market's weighted index rose for a fifth day yesterday, the longest winning streak since July.
Official reports on Monday showed the mainland's manufacturing sector expanded the most in 16 months in August, while a similar gauge for Europe gained more than economists forecast.
Taiwan recorded a current account surplus of US$13.8 billion in the second quarter.
"Southeast Asian countries have been suffering more capital outflows, so economies with healthy trade surpluses like Taiwan benefit," said Frances Cheung, a Hong Kong-based senior strategist at Credit Agricole CIB. "When the market sentiment is better, it will look for currencies to buy but it is still selective."
The Taiwan dollar strengthened 0.5 per cent to NT$29.751 against the US dollar in Taipei yesterday. It touched NT$29.705 earlier, the strongest since June 7.
The yield on government bonds due September 2023, which will be sold at an auction on September 14, increased one basis point to 1.73 per cent in when-issued trading.