TWD Continues To Strengthen; Local Data Eyed

USD/TWD has followed a similar pattern to most USD/Asia EM crosses, the pair initially moved slightly lower before bouncing as the US dollar saw some bids after news that the US was to sanction at least 12 Chinese officials. That move has mostly reversed, the pair last trades at 28.263, just off session lows and compared to highs of 28.283.

• The Taiex has continued to rise, last up around 39 points. The index closed above 14,000 for the first time ever on Friday, strength in the index has helped support TWD.
• At these levels TWD is at the highest against the US dollar since 1997. After the CBC came under scrutiny from regulators last week over currency measures, many expect the central bank will loosen its hold over the currency.
• The central bank said previously it would continue to stabilise the TWD by reducing volatility in a bid to maintain market order. Dealers have noted that the central bank has tended to intervene near the end of sessions recently by buying the US dollar to cap TWD gains, but were conspicuous in their absence yesterday.
• But it's worth noting that the central bank's exchange-rate policy states any move which puts the currency a minimum of 5% from the nominal effective exchange rate's 36-month moving average puts the TWD outside of a stable range. The moves in NEER have not been as dramatic as USD/TWD so while the central bank isn't necessarily comfortable at these levels, stepping up intervention when under scrutiny from lawmakers is unlikely.
• The market looks ahead to Taiwan trade data for November at 0800GMT, Bloomberg estimates expect the trade surplus to narrow to $6.61bn from $7.46bn, exports are expected to rise 8.8%, compared to an 11.2% rise in October, imports are expected to rise 0.3% after falling 1% previously.