Trade Balance Eyed After Decent Inflation Data

Taiwan dollar is stronger in early trade, USD/TWD dropping out of yesterday's range to touch 28.395, the lowest since March 19. Support is seen at 28.316 the 38.2% retracement level of the 2021 move from low to high. The central bank yesterday admitted to "smoothing" the rate, but price swings into the close have been absent, as the rate nears 28.00 the central bank may step in to support the pair, but in 2020 the CBC started engaging in aggressive "smoothing" around 29.50, indicating that being put on the manipulator watchlist by the US treasury could have discouraged the bank.

• Data yesterday showed that headline inflation at 1.26% missed estimates, though the February print was revised marginally higher to 1.40%, core CPI rose above expectations at 1.07%, while a big jump in WPI inflation to 4.36% could indicate inflationary pressures in coming months. Looking at the breakdown of the data of the seven major categories that make up the CPI, travel/ communications posted the largest increase of 5.05% in March on an annual basis, mainly caused by a nearly 25% surge in the price of plane tickets. Rises in the prices of food, clothing and fuel also drove gains.
• Markets look ahead today to trade balance data, the surplus is expected to have narrowed slightly to $4.43bn from $4.51bn, exports are expected to post strong gains again, consensus is for 20% but an anticipated jump in imports is expected to put pressure on the trade balance.
• Elsewhere, Taiwan's economic minister denied reports in the Washington Post that China's military is not using microchips made by TMSC in its military systems.