Market’s perception of an “East vs West” standoff will likely lead USD/TWD to remain sensitive to Ukraine headlines. Economists at Credit Suisse expect USD/TWD to trade higher in an elevated range of 27.80-28.20.
China’s low tolerance for volatility suggests cross-straits escalation is unlikely
“We don’t think the situation in Ukraine is comparable to Taiwan. China views Taiwan as an internal, domestic issue, so its leaders do not consider the actions/disputes of two sovereign states (China’s Ministry of Foreign Affairs still affirms Ukraine’s sovereignty) as a template to settle issues regarding Taiwan.”
“China’s recent efforts to minimize FX and financial market volatility suggest its leaders have little appetite for an escalation of Taiwan Strait tensions that would add to financial market stress. Nevertheless, the market’s perception of an ‘East vs West’ standoff will likely lead USD/TWD to remain sensitive to Ukraine headlines.”
“We expect USD/TWD to trade higher in an elevated range of 27.80-28.20 over the next three months.”