Central Bank Smoothing Negates Strong Data

Taiwan dollar has weakened through the session after strengthening at the open, USD/TWD last at 27.859. USD/TWD has still not managed to close below 28.00 with the central bank actively "smoothing" the market on the close. Markets look ahead to foreign reserves data on Friday for indications of how much the central bank has intervened.

• There are upside risks to TWD, writes ANZ: "The shortage in semiconductors, which has hit many sectors, including the automobile industry, could last through H1 2021. This will likely keep Taiwan's trade surplus close to record highs in the coming months, which bodes well for TWD. We think TWD is well-positioned to benefit from the strong demand for high-end chips."
• Data earlier saw Markit manufacturing PMI rise to 60.4 in February, from 60.2. The strong reading indicated further robust expansion in the manufacturing sector, with a substantial rise in new orders supported expansions of both output and employment.
• "Taiwan's manufacturing sector continued to enjoy its best period of growth for a decade in February, as businesses benefited from robust sales at home and abroad. The steep increases in new work and purchasing activity suggest that activity across the sector will continue to expand strongly in the months ahead" said Annabel Fiddes, Associate Director at IHS Markit.
• There were some areas of concern in the report, supply chain delays were the worst seen on record amid stock shortages and shipping-related delays. This in turn drove a further sharp increase in input costs, which was partly passed on to customers in the form of higher factory gate charges.
• Fig 1 Taiwan Manufacturing PMI

Source: IHS Markit