1 week ago
Taiwan Dollar Rebound Faces Headwinds After Strong August Rise
The Taiwan dollar rose strongly in August after falling sharply in July.
Some analysts now think the rise may slow down.
Fewer foreign investors are putting money into Taiwan’s markets than in the previous week.
Exporters also do not appear to be preparing for a much stronger Taiwan dollar.
The currency benefited partly because dividend-related money leaving Taiwan had decreased.
Taiwan’s economy is still performing well, especially because of its technology industry.
The government expects the economy to grow by more than 10% this year.
Investors will watch new industrial production data for clues about future growth.
The currency could rise further if more foreign money enters Taiwan or the U.S. dollar weakens.
The Taiwan dollar is heading for its strongest monthly gain in more than a year after a sharp July decline.
Analysts say weaker foreign equity inflows and fading forward-market optimism threaten the rebound’s durability.
Inflows fell to about $861 million last week from $6.5 billion the previous week.
Taiwan’s government raised its annual growth forecast to above 10%, supported by the technology sector.
Analysts identified support near 31.80 and 31.77 per U.S. dollar while warning that further gains may be limited.
- Who
- The Taiwan dollar, foreign investors, exporters, Taiwan’s government, and analysts including Christopher Wong, Khoon Goh, and Fiona Lim.
- What
- The Taiwan dollar’s August rebound is facing doubts because foreign inflows and market signals supporting further gains have weakened.
- Where
- Taiwan and its foreign-exchange markets.
- When
- During August, with the currency closing at 31.848 per U.S. dollar on Friday; Taiwan’s industrial production data was due Tuesday.
- Why
- The rebound was partly driven by reduced dividend-repatriation outflows, but analysts say continued gains require renewed foreign capital inflows, stronger exporter dollar-conversion activity, or broader U.S. dollar weakness.
Reasons for Further Taiwan Dollar Gains
Reasons for Caution
Economic fundamentals
Reasons for Further Taiwan Dollar Gains
Taiwan’s technology-led economy remains robust, and the government expects annual growth above 10%, potentially supporting the currency.
Reasons for Caution
Strong economic fundamentals alone may not generate further gains without renewed foreign capital inflows.
Capital flows
Reasons for Further Taiwan Dollar Gains
Net inflows recovered from July’s slump, and additional foreign equity investment could support another advance.
Reasons for Caution
Inflows slowed sharply to about $861 million from $6.5 billion, while analysts said the foreign-equity inflow impulse had faded.
Market positioning
Reasons for Further Taiwan Dollar Gains
Forward points could return to positive territory if hedging demand increases, which would price in Taiwan dollar weakness but could also lead to more two-way trading and opportunities for gains.
Reasons for Caution
Forward points drifting toward neutral indicate reduced confidence in a sustained Taiwan dollar rise, while technical resistance and a possible U.S. dollar rebound could limit appreciation.
Key facts
- August performance
- The Taiwan dollar was on track for its strongest monthly rise in more than a year and its best month since May 2025.
- July performance
- The currency suffered its worst July decline in 11 years.
- Latest exchange rate
- It closed at 31.848 per U.S. dollar on Friday.
- Foreign inflows
- Net inflows were about $861 million last week, down from $6.5 billion the previous week.
- Growth forecast
- Taiwan raised its annual economic growth forecast to above 10%.
- Market indicator
- One-week non-deliverable forward points moved from negative territory toward neutral levels during August.
- Support levels
- Analysts cited 31.80 and 31.77 as important near-term support levels for the dollar-Taiwan dollar pair.
Quotes
Christopher Wong
Strategist at Oversea-Chinese Banking Corp. in Singapore
“31.77 is a key support level though and we may see more two-way action, especially if the dollar starts to make a more meaningful rebound.”
livemint.com
“Dollar-Taiwan dollar has been tracking equity flows nicely throughout this year, until the recent moves.”
livemint.com
Sources
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