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Offshore Investors Sell Local Shares, But TWD Stabilizes

TWD

The 1 month USD/TWD NDF edged back below 30.00 in overnight trading, ending in NY just under 29.97. Note spot closed above 30.00 yesterday, although onshore banks were reportedly selling USDs to curb upside pressure.

  • CNH also traded a little firmer, while China's Golden Dragon index ended the NY session higher (albeit with a good degree of volatility). The market though seems to have taken some comfort from China's response to Pelosi's visit to Taiwan.
  • At face value measures don’t appear to be significantly increasing tensions. Planned live fire military drills by China, which will take place around Taiwan, will commence tomorrow and will reportedly last for 4 days.
  • Developments will obviously be watched closely today though, as Pelosi is scheduled to meet Taiwan President Tsai Ing-Wen at 10:53am today.
  • Any further economic announcements will also be watched, after China announced curbs on Taiwan food imports yesterday.
  • USD/TWD implied vol has edged lower in the 1 week and 1 month space for USD/TWD, with the 1 week implied just above 7%. The 1 month risk reversal is at recent highs (+1.53), but the rate of ascent has slowed.
  • Yesterday onshore equities lost 1.6%, while offshore investors sold $692.5mn in local shares. This is the largest net daily outflow since the end of June.
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