Central Bank Intervention Limits Volatility

USD/TWD finished slightly higher yesterday as broad risk off sentiment saw flows away from EM FX, while reports in the WSJ that Yellen said she would not pursue a weak US dollar helped give the greenback a bid.

• USD/TWD moved between 27.95 -28.00 in Asia trade on Monday before swinging to close at 28.242 in the usual spike on the close. The pair consistently closes around 28.30, but spends the vast majority of the session below the 28.00 handle (since Jan. 5). The spikes into the close have served to suppress volatility in TWD. Taiwan dollar's 30-day historical volatility has fallen to 1.5%, its lowest since mid-September. It last saw a closing level denoting an intraday price swing of greater than 0.5% in either direction was early December as the central bank intervene to limit gains.
• Looking ahead the domestic docket is thin this week, the highlights come in the form of export orders on Wednesday, and unemployment data on Friday.
• On export orders, Taiwan President Tsai Ing--wen said during a temple on Monday that Taiwan's successful epidemic prevention efforts meant the country had enjoyed stable economic growth ahead of the other three "Asian Tigers" in 2020 on stronger exports, with similar performance expected in 2021.