BOJ Governor Kazuo Ueda Hints at Rate Hike as Inflation Pressures Build 
Goldman Sachs Delays Fed Rate Cut Forecast to 2026 Amid Rising Inflation Concerns 
OECD Sees Bank of Japan Raising Interest Rates to 2% by 2027 
Paraguay Holds Interest Rate at 5.5% as Inflation Remains Stable Amid Global Uncertainty 
AI-Driven Inflation Raises U.S. Consumer Prices, Goldman Sachs Says 
Japan Inflation Expectations Rise as BOJ Rate Hike Timing Faces Uncertainty 
Eurozone Recession Risks Rise as Middle East Conflict Threatens Growth, ECB Official Warns 
We emphasize potential trading opportunities related to anomalies or dislocations in emerging market currencies.
TWD has been too strong versus rate differentials,
The TWD is more correlated to interest rate differentials than most EM currencies; the move lower in USDTWD in the past month has far exceeded levels consistent with rates.
Assuming the Fed hikes by year end (we expect a rate hike in December) or at the minimum the market continues to ascribe a decent probability to a near-term rate increase coupled with the likelihood that the CBC eases, rate differentials should move further in the USD’s favour.
Taiwan is also susceptible to renewed fears of China’s growth slowdown. While negative forward points provide positive carry in shorting the TWD.
Hence, we encourage longs in USDTWD on its attractive carry and China exposure sentiment toward EM currencies could be in the procedure of shifting and we prefer to focus on regional low yielders in expressing a bullish dollar view. The slew of hawkish commentary from Fed officials in recent weeks as put the possibility of a rate hike back in play for H2.
