Taiwan Dollar: CBC steady as equity flows drive weakness – MUFG
MUFG notes Taiwan’s headline inflation eased to 2.33% year-on-year in October, with core at 2.23%, both above the 2% alert level. The CBC is expected to keep its policy rate at 2.00% in December, though persistent Taiwan Dollar (TWD) weakness could tilt risks higher.
In October, Taiwan's headline inflation slowed to 2.33% year-on-year, while core inflation decelerated to 2.23%, both exceeding the 2% threshold. The Bank of Taiwan (CBC) is projected to maintain its policy rate at 2.00% in December, although ongoing weakness in the Taiwan Dollar (TWD) could heighten risks. Government officials have advocated for exporters and banks to aid US Dollar conversions, as TWD is increasingly acting as a high-beta semiconductor and equity-flow currency, akin to a conventional currency driven by a strong current account.
Although both inflation figures are still above the 2% alert level, we anticipate the CBC to maintain its policy rate at 2.00% in December, albeit a persistent TWD weakness might marginally increase upside risk. Yesterday, CBC officials urged exporters to convert their US dollar earnings whenever favorable conditions arise and asked banks to accommodate exporters' US dollar conversion needs.
With a Democratic victory, we may expect a lower US yield tail risk, potentially offering support to semiconductor valuations and Taiwan equities.
Written by urgent.news from FXStreet's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
This story
This is one outlet's version. Read the fullest account.
