Standard Chartered Bank: Elevated TWD NEER to weigh on the TWD
Quotes from Standard Chartered Bank The Taiwan dollar (TWD) has been the strongest performer against the US dollar (USD) in Northeast Asia YTD, appreciating by 0.68%. It has benefited from strong equity inflows, with ove…
The Taiwan dollar (TWD) has been the strongest performer against the US dollar (USD) in Northeast Asia YTD, appreciating by 0.68%. It has benefited from strong equity inflows, with over USD 5.7bn of foreign buying, and underlying economic activity.
Lower oil prices have benefited Taiwan's external position and also supported the currency. However, we expect FX policy to play a larger role in the TWD outlook.
The TWD's outperformance has led to the TWD nominal effective exchange rate (NEER) reaching multi-year highs.
We expect greater intolerance of TWD appreciation, especially on the back of a rebound in the USD ahead of nonfarm payroll data releases and as we expect USD-JPY to see a sustained break above 120. We maintain a short-term Underweight FX weighting on the TWD.
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