Recycling riches

The jump in Taiwan’s already large external surpluses is not a one-off increase that will be corrected. Demand for the country’s exports remains robust and broad-based. Indeed, for many of its products there are no alternatives. Recycling these sums is proving increasingly difficult, which is being reflected in the acceleration of central bank reserve accumulation and rising domestic liquidity. The economy is hot; it risks overheating. Keeping the local currency weaker than it should be seems the ideal way to achieve this undesirable outcome. We remain long the Taiwanese dollar.

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