Taiwan’s dollar advanced for a second week as the government vowed to contain inflation. The overnight interbank lending rate reached a three-year high. The currency advanced for a second day after the Cabinet said in a statement yesterday that it will “closely monitor� inflation, and may use monetary policy to counter rising prices if needed. The central bank may allow faster gains in the overnight rate and the local dollar, the Commercial Times reported on April 17, citing an unidentified official. Consumer prices rose 1.21 percent in March from a year earlier, after a 0.23 percent increase the previous month, government data show. “The central bank is quite determined to control inflation,� said Tarsicio Tong, a currency trader at Union Bank of Taiwan in Taipei. “It’s allowing rises in the overnight rate to drain excess cash from the system.� Taiwan’s dollar strengthened 0.04 percent today to NT$29.521 against its U.S. counterpart and advanced 0.02 percent this week, according to Taipei Forex Inc. One-month implied volatility, a measure of exchange-rate swings traders use to price options, dropped 20 basis points today to 3.5 percent, capping a decline of 40 basis points for the week. A basis point is 0.01 percentage point. The overnight money-market rose 0.6 basis point to 0.491 percent this week, according to a weighted average compiled by the Taiwan Interbank Money Center. It reached 0.493 percent yesterday, the highest level since December 2008, and was little changed today. The yield on the government’s 1 percent securities due January 2017 fell 0.6 basis point to 1.038 percent this week, according to Gretai Securities Market. It was little changed today. To contact the reporter on this story: Andrea Wong in Taipei at awong268@bloomberg.net To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net.

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