TWD likely to advance further in weeks ahead, further upside seen despite recent equity outflow: Scotiabank

The TWD is expected to advance further in the weeks ahead, as the US Department of the Treasury will update its semi-annual currency-monitoring list due in mid-October 2019 and mid-April 2020, according to the latest research report from Scotiabank.

Foreign investors are expected to show renewed interest in Taiwan’s equities, although they have been pulling out a net USD1.13 billion of funds from local equity markets since December 30.

In addition, more investment can been seen by local firms returning from mainland China despite the phase-one trade deal reached between the US and China. Bloomberg reported on Monday that the Chinese trade delegation plans to sign the first phase of its trade deal with the US in Washington on January 15, citing people familiar with the matter.

The TWD tended to forfeit much of its daily gains in the last half hour of the trading session since early December, suggesting further upside potential for the island’s currency despite recent equity outflows, the report added.

Taiwan’s foreign reserves increased to a fresh high of USD478.13 billion in December from USD474.05 billion the previous month.

The CBC said in a statement on Monday that the rise could be largely due to 1) the appreciation of the EUR and other reserve currencies against the USD; 2) returns from FX reserves management and; 3) the central bank’s operations aimed at maintaining an orderly FX market amid large and sudden capital inflows.

"We maintain our short USD/TWD position and long TWD/THB cross position. One of seven members of the BoT’s monetary policy committee told reporters in Bangkok on Monday that the central bank will aim to prevent the baht from strengthening past 30 per dollar," Scotiabank further commented in the report.

Meanwhile, the Thai central bank said on Tuesday that it will mull need for more measures to curb the baht’s strength.