Currency Forecast - TWD: Broad Appreciatory Trend To Remain Intact - JAN 2018

BMI View: We expect the TWD to trade sideways in the short-term before resuming its gradually appreciatory path in the longer term as a strong external position and positive growth-inflation dynamics relative to the US lend support. We thus maintain our forecast for the TWD to average TWD29.50/USD in 2018 .

Short-Term Outlook (three-to-six months)

The TWD looks likely to remain range bound, with the TWD30.00/USD acting as a firm level of resistance. With the CNY having strengthened against the TWD in recent months, we believe that this will provide the TWD with some room to strengthen further without losing export competitiveness. However, we expect the central bank to seek to ensure the stability of the currency over the coming months. While Taiwan was taken off the US Treasury's watchlist, the Treasury stated that it would continue to urge Taiwan to be more transparent in the management of its foreign reserves and foreign exchange interventions. In addition, Taiwan's long-serving central bank governor, Perng Fai-nan is set to retire in February 2018 and we believe that the central bank will seek currency stability to ensure a smooth succession.

Likely To Remain Range Bound
Taiwan - Exchange Rate, TWD/USD
Source: BMI, Bloomberg

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