On-Going Military Exercises & Weaker Tech Sentiment In Focus

1 month USD/TWD spent most of the post Asia close above 30.00, although we didn't get beyond 30.05. Spot finished yesterday's onshore session just above 30.01. Whilst the pair may be slowly establishing a higher range, vol and risk reversal metrics remained fairly benign. Reflecting recent tight ranges, the 1 month implied is back just under 6%, versus August 2 highs close to 7.50%.

• There was focus on China announcing a continuation of military exercises around Taiwan island. The exact location of the drills remains unclear but the Taiwan Defence Ministry stated over 20 aircraft crossed the informal median line which divides the Taiwan Strait yesterday.
• There is a sense such these military exercises, along with those recently concluded, could become the new norm. That is, a closer military presence to the island.
• Broader sentiment doesn't appear too fazed though and the Taiwan authorities noted some shipping and aircraft activity has resumed. Nevertheless, be mindful of headline risk around this issue.
• Elsewhere the focus will be on a weaker tech lead overnight. Weaker than expected revenue from Nvidia saw tech shares underperform. The SOX fell by 1.61%. Yesterday Taiwan shares finished down -0.10, while offshore investors sold local shares (-$47.2mn).
• Taiwan export growth was better than expected late yesterday, up 14.2% YoY, versus 11.1% expected for July. The trade surplus remained healthy at just over $5bn, which was also above expectations.