Fed Governor Lisa Cook Warns Inflation Risks Remain as Rates Stay Steady 
BOJ Policymakers Warn Weak Yen Could Fuel Inflation Risks and Delay Rate Action 
China Extends Gold Buying Streak as Reserves Surge Despite Volatile Prices 
ECB’s Cipollone Backs Digital Euro as Europe Pushes for Payment System Independence 
Federal Reserve Faces Subpoena Delay Amid Investigation Into Chair Jerome Powell 
RBA Raises Interest Rates by 25 Basis Points as Inflation Pressures Persist 
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.
