Taiwan’s dollar rose for a third day after the island signed agreements with China to further strengthen financial ties and cross-strait travel, brightening the outlook for local exporters. The two sides agreed over the weekend to more than double weekly direct flights to 270 from the 108 agreed to in November, Chiang Pin-kung, head of Taiwan’s Straits Exchange Foundation, said yesterday. The currency also rose as regional stocks rallied after the Federal Reserve said most U.S. banks being given stress tests have adequate capital, improving investors’ appetite for emerging-market assets. “The agreements show ongoing momentum in terms of bolstering cross-strait ties; that’s obviously positive for the Taiwan dollar,” said Dwyfor Evans, a Hong Kong-based strategist at State Street Global Markets. “It looks as if many of the underlying assumptions of the stress tests are somewhat generous, which skews it towards a favorable outcome, which could lend some risk appetite to the market.” Taiwan’s dollar climbed to NT$33.690 against the U.S. currency as of 9:50 a.m. local time, from NT$33.711 on April 24, according to Taipei Forex Inc. It touched NT$33.631, the strongest level since April 15. Direct cargo and passenger links between Taiwan and China had been banned since 1949, forcing goods and people to transit via a third port, usually Hong Kong. Exports account for about 70 percent of Taiwan’s economy, and China is Taiwan’s biggest overseas market. The two sides also agreed on forming a supervisory mechanism for financial services companies doing business across their markets, and to set up a currency-clearance system, the Straits Exchange Foundation said in a statement yesterday.

Source