Weakness in Asian FX is extending from the...>

TAIWAN: Weakness in Asian FX is extending from the weak balance sheet economies

to the strong balance sheet economies, with the Taiwanese dollar giving back all

its gains for the year so far. USDTWD is currently at 29.66, with the next level

of resistance coming in at 29.87 (100DMA) and then 30.00. A break of the latter

would suggest a major trend change.

- While the central bank continues to build reserves suggesting that recent

weakness has not been fundamentally driven, it is common for the CBRC to build

reserves to weaken the currency for extended periods if they seek to maintain

export competitiveness amid a rising U.S. dollar globally.

- Policymakers are likely wary of the PBOC weakening the yuan in response to the

threat of slower global trade growth. The CNY has remained stable in recent

weeks in spite of the weakness seen across Asian FX, but a trend change is

increasingly likely as the interest rate advantage over the U.S. continues to

narrow.