Taiwan dollar lost almost 0.5 pct in the aftermath of the weekend voting. The USD/TWD pair traded close to 21.30 for the first time in over three weeks.
DPP’s Lai Ching Te was elected as President. Such an outcome was widely expected and points to maintaining the status quo in cross-strain tensions. The ruling party lost control of the legislature, however. The threat of political gridlock resulting from the lack of a parliamentary majority held by any party seems to weigh on the currency. Stern warnings from the Chinese officials against any moves toward independence might also play a role in the USD/TWD’s move higher.
Fintech Conotoxia sees limited scope for TWD’s further weakness and expects the currency to shake off initial turbulence. Our currency forecasts assume the USD/TWD will return to a downward path because of a supportive macro backdrop, including strong exports and a broad-based US dollar weakness. We expect the currency pair to trade a tad above 31.00 in Q1 and to drop towards the 29.00 handle before the year-end.