Taiwanese Dollar Hits Near 3-Year High

The Taiwanese dollar fell past 31.7 per dollar in early March, marking its weakest level since May 2025, as heavy foreign selling of Taiwanese equities added pressure on the currency. Overseas investors recorded around NT$95 billion in net stock outflows on Tuesday, one of the largest withdrawals in more than a year, amplifying risk-off sentiment in both equity and FX markets. At the same time, rising geopolitical tensions in the Middle East boosted demand for the US dollar as a safe haven, while higher oil prices raised concerns about global inflation and the outlook for interest rates, weighing on Asian currencies more broadly. Short-term forwards for USD/TWD were reported above 32, suggesting market expectations of further downside pressure for the Taiwan dollar, while trading volumes surged to levels not seen in years as investors responded to heightened uncertainty.

The Taiwanese dollar fell past 31 per US dollar, returning to its lowest level since early May after sharp swings over the recent two sessions. The currency surged last week following a joint statement from Taiwan’s central bank and the US Treasury, which said they would refrain from intervening in exchange rates or the international monetary system to gain an unfair competitive advantage, and that FX intervention would be used only to manage volatility. In a separate statement, the central bank noted that the US did not request currency appreciation and that the joint statement is unrelated to ongoing tariff negotiations, dispelling speculation that authorities might allow the currency to strengthen to support a trade deal. Meanwhile, Taiwanese officials said talks with the US are nearing conclusion, with local media reporting that both sides have agreed to reduce the previously announced 20% reciprocal tariff.

The Taiwan dollar surged over 2% to 29.17 per U.S. dollar in another volatile session on Tuesday, with traders attributing the rally to expectations of upcoming Fed rate cuts, broad dollar weakness, and sustained foreign capital inflows into the island. The gain pushed the local currency’s year-to-date gain to 12%, cementing its status as Asia’s best-performing currency in 2025. Strength in the Taiwan dollar has been underpinned by resilient tech exports—particularly semiconductors—and growing foreign interest in Taiwanese equities, fueled by optimism surrounding AI-driven demand. The central bank’s hands-off approach has led to speculation that authorities may be tolerating a stronger currency to curb imported inflation. However, the rapid appreciation has begun to raise concerns among exporters, who are grappling with shrinking margins. Market participants now await signals from the central bank as the currency’s surge continues to test the limits of monetary policy patience.