Taiwanese Dollar Retreats After Two-Day Rally

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.

The Taiwanese dollar slid past 30 per US dollar on Tuesday, snapping a two-day rally and retreating from a near three-year high reached in the previous session. The recent surge was driven by speculation that the appreciation of Asian currencies, including the Taiwanese dollar and Malaysian ringgit, might be part of broader efforts to accelerate trade deals with the US. However, Taiwan’s central bank denied making any such deal, stating that the US had not asked for a stronger Taiwan dollar, while President Lai Ching-te urged people not to spread false information about alleged currency talks with the US. Taiwan is a major producer of high-end computer chips, with significant exports to both the U.S. and China, making it especially sensitive to shifts in global trade dynamics.