TWD Vol Elevated Ahead of Likely Pelosi Visit

The 1 month USD/TWD NDF continued to rise post the Asia close. After onshore spot breached 30.00 for the first time yesterday since 2020, the 1 month spiked above 30.30 in overnight trading. We closed NY around 30.17, while onshore spot ended yesterday at 29.982.

• 1 week volatility for USD/TWD is up to 7.43% in the implied space. Close to previous YTD highs (8.5% on an intra-day basis), while in the 1 month we are just above 7.11%, which elevated but also below earlier YTD highs.
• To be sure, vols have also picked up for CNH and KRW but the moves have been more contained in a relative sense. No doubt the market is a little more nervous in the TWD space now that the much spoke about Pelosi trip to Taiwan is set to go ahead. Focus will be on China's potential response to the visit.
• The macro backdrop has also weighed on TWD. Yesterday's PMI print was quite weak, 44.6 for July, the weakest print since early 2020 and a sharp drop from the previous month's 49.8 outcome.
• Taiwan equities underperformed yesterday, as offshore investors offloaded -$280.7mn local shares, while inflow momentum was generally positive elsewhere in the region. The overnight lead from tech equities was a little firmer though, so that may aid sentiment at the margin today.