Japan Services Producer Prices Rise 3.2% in June, Supporting BOJ Rate Hike Expectations 
Brazil Cuts Selic Rate to 14% as Inflation Eases but Risks Persist 
BOJ Rate Decision in Focus as Sticky Inflation, Weak Yen Shape USD/JPY and Nikkei Outlook 
Gold Slips Below $4050 as Bond Yields Surge to 4.7% on Fed Inflation Concerns – Sell Rallies at $4060 Targeting $3940 
China Holds Loan Prime Rates Steady for 14th Month as Economic Recovery Remains Uneven 
Fed Holds Interest Rates Steady as Kevin Warsh Says Rising Treasury Yields Tighten Financial Conditions 
We emphasize potential trading opportunities related to anomalies or dislocations in emerging market currencies.
TWD has been too strong versus rate differentials,
The TWD is more correlated to interest rate differentials than most EM currencies; the move lower in USDTWD in the past month has far exceeded levels consistent with rates.
Assuming the Fed hikes by year end (we expect a rate hike in December) or at the minimum the market continues to ascribe a decent probability to a near-term rate increase coupled with the likelihood that the CBC eases, rate differentials should move further in the USD’s favour.
Taiwan is also susceptible to renewed fears of China’s growth slowdown. While negative forward points provide positive carry in shorting the TWD.
Hence, we encourage longs in USDTWD on its attractive carry and China exposure sentiment toward EM currencies could be in the procedure of shifting and we prefer to focus on regional low yielders in expressing a bullish dollar view. The slew of hawkish commentary from Fed officials in recent weeks as put the possibility of a rate hike back in play for H2.
