Further downside in USD/TWD will likely come mainly from broad USD weakness, as the pair approaches a key support level at 29. Nonetheless, economists at ANZ Bank expect the break below the mentioned support to come next year.
Key quotes
“TWD has been one of the top performers in the region, for good reasons. Its track record in combating the pandemic is among the best, in Asia and globally. This, coupled with the economy’s high exposure to the tech sector, has seen exports contracting by the least in the region. That said, with TWD at the strongest level since April 2018, the room for further appreciation appears to be limited.”
“Looking ahead, there could be some diversion of flows to other Asian markets as the latter gradually emerge from the downturn. We see downside risk in USD/TWD, given our expectation of structural weakness in USD through 2021.”
“USD/TWD is approaching key support at 29.0. With the rise in foreign reserves accelerating since June, any further fall in USD/TWD could be a grind, and a break of 29.0 may come only in 2021.”
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