USD/TWD Moves Off Recent Highs Amid Tech Equity Rally, Scope For Higher Equity Inflows

Spot USD/TWD ended yesterday's session at 31.93, down slightly from recent highs close to 32.00. On the downside, the 20-day EMA is back near 31.74. The 1 month NDF finished Wednesday's session near 31.81 (its 20-day EMA is near 31.71). Sentiment was aided by the tech-led US equity rally.

• With signs that Taiwan equities were already finding somewhat of a base we could see further positive momentum today given the SOX rallied +2% in Wednesday US trade, while AI optimism has been buoyed by Nvidia's results.
• To the extent this boosts offshore inflows into Taiwan equities, it may lend TWD some support. Yesterday saw +$230.3mn in net inflows, although August outflows to date remain large at just over $4bn, so there is some scope for more positive momentum on this front.
• The data backdrop is also slightly less adverse for TWD. IP growth for July was -15.2% y/y, but is showing signs of a base, while earlier in the week, July export orders printed at -12.0% y/y, slightly better than expected and the best print since Q4 last year.
• Encouragingly, electronic export orders were nearly flat in y/y terms in July, versus -22.0% y/y in June. The worst of the downside y/y momentum for this segment of export orders appears to be behind us.