The Taiwan dollar recorded its largest one-day jump since May, gaining over 2% against the US dollar. The sudden appreciation was triggered by strong demand for the local currency from exporters and speculative traders testing the limits of the central bank’s tolerance for volatility. The currency peaked around NT$29.16, raising concerns across financial markets.
This sharp move unsettled major exporters like TSMC and Foxconn, whose USD revenues lose value when converted back to a stronger Taiwan dollar. The rally also put pressure on insurers heavily exposed to USD-denominated assets, forcing them to adjust hedging strategies that may now carry increased costs. These rapid swings are challenging financial planning for many Taiwan-based corporations.
The central bank appears to be observing the situation without immediate intervention, suggesting a possible acceptance of a stronger currency to help manage imported inflation. However, if volatility escalates or competitiveness suffers, market participants expect authorities to step in. Past interventions have usually aimed to avoid sharp dislocations rather than maintain a specific exchange rate.
Traders remain focused on macro signals, including regional repatriation trends and potential outcomes of Taiwan’s trade discussions with the US. As the Taiwan dollar continues to attract bullish positioning, attention now turns to how long the central bank can afford this hands-off approach before it starts to impact the broader economy.
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