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J.P.Morgan note that "continued upside surprises in exports of Taiwan, China, and strong external sector fundamentals remain structurally bullish factors for TWD. As the improvement in export sector activity is now broadening out to non-tech products, Taiwan's exporters are well positioned to benefit from the recovery in global demand in 2H20. A sustained low interest rate environment globally and compression in the US-TW yield spread has shrunk residential bond outflows from Taiwan, a major avenue for recycling its massive current account surplus. Foreign equity flows have not returned meaningfully after the retrenchment of Q1, but potential upside in Apple supply chain equity names heading into this year's new product launch cycle in the fall could partially reverse previous outflows, despite unavoidable tail risk around US-China geopolitics. Strong current and capital account fundamentals need not necessarily translate into clean outperformance of TWD FX in the short term, partly due to drags from the slower-than-expected pace of lifer and exporter FX hedging. More importantly, the central bank has appeared increasingly uncomfortable with currency appreciation. CBC has reportedly actively engaged in FX market smoothing via outright reserve accumulation as well as regulatory tweaks. Risks that such intervention activity invite a manipulator label from the US Treasury have reduced, in our view, as concerns around trade partners' currency management practices have arguably taken a backseat to apparent US efforts to form a united front of allies in its geopolitical conflict with China. We retain a structurally bullish bias on TWD on account of Taiwan's solid fundamentals and its pole position at the leading edge of tech manufacturing. However, official smoothing, unfavorable entry levels on the NEER and steep negative carry dissuade us from chasing TWD higher from current levels. We will be on the lookout for a more meaningful shift lower in the TWD NEER towards the midpoint of the "dynamic stability corridor", possibly amid an escalation in US-China tensions to initiate fresh USD/TWD shorts."