Written by Steven Dooley, Head of Market Insights, and Shier Lee Lim, Lead FX and Macro Strategist
Taiwanese dollar surges as “appreciation by stealth” mooted
The US dollar was weaker across Asia on Monday as a historic sell-off in the USD/TWD pair, causing the Taiwanese dollar to surge higher, led the greenback lower.
The USD/TWD fell 3.7% on Friday and was followed by a 2.4% loss on Monday – sending the pair to the lowest level since 2022.
Reuters reported there was no clear catalyst for the fall in the pair but a lack of USD buyers was seen in the market.
The move corresponded with US-Taiwan trade talks and could be a sign the Taiwan government was allowing the TWD to rise.
The USD was lower across Asia with the AUD/USD rising to five-month highs while the USD/CNH fell to 11-month lows.
Fed rate cuts priced out after US jobs
The USD’s losses came in spite of a shift in Federal Reserve pricing after Friday’s US nonfarm payrolls exceeded forecasts.
The OIS market saw a dramatic repricing as a result of the data, going from 41 basis points of cumulative cuts for the July FOMC last Wednesday to 27 basis points as of this writing.
The cumulative cuts for December FOMC are currently priced at 93 basis points.
On Thursday, the FOMC will make its most recent policy announcement.
Looking at APAC FX, USD/SGD is now circa 1% higher from monthly Sept 2024 lows of 1.2789, given the election performance of People’s Action Party.
Given USD/SGD is now at its low end of 30-day trading range, USD buyers may look to take advantage.
Next resistance at 21-day EMA of 1.3144.
AUD supported as Labor landslide keeps stimulus in place
The Aussie extended gains on Monday as the market continued to feel the impact of the weekend’s election. Australia’s Labor Party, led by Anthony Albanese, secured a decisive victory, winning at least 82 seats and potentially up to 90, a significant jump from 77 in 2022.
This majority strengthens Labor’s position in the Senate, likely enabling the passage of key policies, including doubling the tax rate on superannuation earnings above AUD 3 million and AUD 18 billion in household tax cuts.
Fiscal policy will remain stimulatory, supporting economic growth.
Meanwhile, the Reserve Bank of Australia is expected to cut rates by 25bps on 20 May, with further reductions totaling 100bps in 2025.
AUD/USD is now at the top end of its 30-day trading range providing opportunity for USD buyers.
Near term support at its 200-day EMA of 0.6409 holds for now.
USD plunges in Asia
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 5 – 10 May
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*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.
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