TAIPEI: Taiwan's dollar will gain 3 percent against the US currency in the next three months, buoyed by trade and investment flowing from warmer ties between the island and the mainland, according to Barclays Plc.

The New Taiwan Dollar has rallied more than 7 percent after falling to a seven-year low on March 3. With direct flights, shipping and cross-Straits postal services coming on stream, Taiwan is drawing up a list of industries that it will open to mainland investment as part of a policy by Taiwan leader Ma Ying-jeou to ease restrictions on economic relations with the mainland. The list is to be released by the end of the month.

"While we await the release of further details, we remain optimistic on these dynamics, given that they potentially represent not just increased foreign-currency accumulation, but also a dramatic reduction in the cost of doing business over time," Barclays economists including Singapore-based David Forrester and Wai Ho Leong wrote in a report yesterday.

Taiwan's dollar will strengthen to NT$32 per dollar in three months, the report said. It touched NT$32.228 on June 1, the strongest level since October.

Non-deliverable forwards contracts in the Taiwan dollar indicate the currency will trade at NT$32.63 in three months. Forwards are agreements in which assets are bought and sold at current prices for future delivery.

Stocks rally

The benchmark Taiex index of stocks surged the most since 1991 on April 30 after Taiwan allowed mainland investments for the first time since the two sides split in 1949. The share index has climbed 35 percent this year.

Lenovo Group and Haier Electronics Group Co are among 40 mainland companies that agreed to buy about $2.2 billion of goods from Taiwan, Taiwan's trade council said on June 4.

Sichuan Changhong Electric Co, the mainland's second-largest television maker, said on June 2 that it may buy stakes in AU Optronics Corp, Taiwan's biggest maker of liquid-crystal displays, and two other flat panel makers.

"If we see such M&A between cross-Straits gatherings, this helps positive sentiment," said Daniel Soh, an economist at Forecast Pte in Singapore, who forecasts the Taiwan dollar will reach NT$32.21 by year-end. "If you want to see the real impact on the economy, it'll take longer."