Winning Streak Extends

Taiwan dollar is stronger again, set to extend its rally to a seventh session, the longest winning streak since March 2020. There was chatter yesterday that the move lower was accelerated by USD sales by exporters, though state banks reportedly stepped in (likely on behalf of the CBC) after the rate crossed the 27.6 level. As a note the cycle low close was hit on June 11 at 27.61 while the intraday low is 27.505 hit on June 1. The CBC has already set the stage for renewed intervention, CBC's director general of the Department of Foreign Exchange Tsai said the FOMC's plan to taper could result in volatility in TWD and the CBC stands ready to step in to stabilise the market. The CBC remains on the US Treasury's currency manipulator watchlist. USD/TWD last down 0.049 at 27.576.

• Markets look ahead to CPI and trade data later in the session. Inflation is expected to slow slightly, the trade balance is expected to widen though the pace of both imports and exports are expected to slow, in the latest PMI survey new export orders fell to 55.5 from 63.7 previously which portends an export slowdown.
• On CPI Goldman Sachs says: "We expect headline CPI inflation in August to moderate to 1.9% year-on-year (Bloomberg consensus: 2.1%) from 2.0% yoy in July. High frequency data suggest that vegetable and fruit prices rose at a slower pace in August. Local gasoline prices increased 23% yoy in August, moderating from 25% yoy in July. The implied sequential change in headline CPI would be +0.1% mom after seasonal adjustment (vs. +0.2% in July). Core CPI inflation is likely to be broadly stable at 1.3% yoy (Bloomberg consensus: 1.2%), the same as July."