Taiwan’s central bank, the Central Bank of the Republic of China (CBC), hiked by 12.5 bps to 2% last Friday, the highest level since 2008. Economists at Commerzbank anlayze USD/TWD after the decision.

CBC’s action and watchfulness over inflation should provide some support for TWD near term

We don’t expect CBC to follow up with a series of rate hikes. They are likely to adopt a cautious wait-and-see approach.

CBC’s action and watchfulness over inflation should provide some support for TWD near term. 

We look for USD/TWD to head lower, back below 31.00 by year-end, aided by the expected recovery in electronic exports.