All Eyes On Tomorrow's Rate Announcement

Taiwan dollar has weakened since the open, a rare occurrence that suggest the lack of central bank smoothing, USD/TWD last changes hands at 28.333. Markets await the CBC rate announcement on Thursday.

• All analysts surveyed by Bloomberg unanimously expect the CBC to keep policy settings unchanged at its March meetings, the benchmark interest rate currently sits at 1.125%.
• Since the December meeting data has shown solid activity, particularly in exports which have been robust thanks to strong demand for electronics globally. This helped GDP to be much stronger than expected at the latest print, while inflation remains subdued. The recovery is uneven though, with exports and industrial activity outperforming retail sales.
• External conditions are also positive for Taiwan's recovery; the $1.9tn US stimulus package should boost the US recovery, thereby benefitting Taiwan's exports, while new cases of COVID-19 globally are dropping as vaccination programmes gather pace.
• Continued strength in TWD against USD is expected to give the CBC reasons to remain dovish. Minutes from the December meeting continued to emphasise that "sharp appreciation in TWD seriously hurt exports of traditional sectors", given low profit margins and high sensitivity to TWD appreciation.
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