The New Taiwan Dollar (TWD) has been under notable pressure in recent weeks, with a series of key developments influencing its performance. Analysts highlight a significant appreciation trend of over 10% this year, which has prompted Taiwan's central bank to enforce stricter capital control measures. These measures aim to curb the influx of foreign investment that has not been directed towards domestic securities, raising concerns about the TWD's impact on Taiwan's export-driven economy.
Furthermore, Fitch Ratings has placed five major Taiwanese life insurers on a "Rating Watch Negative" status due to financial stress resulting from the TWD's appreciation. This situation poses risks for these insurers due to their large holdings in U.S. dollars, further complicating the economic landscape for the TWD.
While domestic inflation appears to be easing, Taiwan's central bank has expressed unease regarding the economic outlook for the remainder of the year, citing the adverse effects of U.S. tariffs. Such tariffs contribute to heightened uncertainty in international trade, which could further affect the TWD.
In terms of exchange rate performance, the TWD is currently trading at 0.032780 against the USD, which is 2.7% below its three-month average. The currency has shown stability in a modest range of 5.8% over the last three months. The TWD to EUR rate has reached 90-day lows at 0.028063, down 3.3% from its three-month average, while the TWD to GBP is currently at 0.024264, 2.8% below its average. The TWD’s performance against the JPY also reflects weakness, trading at 4.8123, which is 2.4% below the three-month average.
As Asian currencies gain strength, discussions around potential currency revaluation as a strategy in negotiations with the U.S. are emerging. Analysts caution that while such moves could help balance trade, they might also harm Taiwan's export competitiveness. Current market conditions call for careful monitoring of these developments, particularly due to the potential for increased volatility and its implications for future TWD performance against other currencies.
