Outlook
The TWD is likely to stay in a contained range near current levels, supported by renewed optimism over US-China trade talks and improving capital inflows, but facing ongoing export-margin pressures as the currency remains comparatively firm. The central bank’s non-intervention stance keeps downside risk to exporters in check while allowing some appreciation to occur, though any shift in policy or risk appetite could quickly re-price in volatility.
Key drivers
- Central Bank’s non-intervention stance (currency strength allowed to unfold naturally; policy durability supports a steady backdrop but exposes exporters to margins compression if the TWD strengthens further).
- Trade optimism and capital inflows (renewed optimism around US-China talks has drawn flows into Taiwan, underpinning the TWD and limiting downside for now).
- Insurer profitability concerns from currency strength (the TWD’s appreciation has raised hedging costs for life insurers with USD-denominated assets, pressuring margins).
- Export sector sensitivity (firms earning in USD may see margin pressure if the TWD remains firm or strengthens further; volatility in trade dynamics could tilt sentiment quickly).
Range
TWD/USD is at 0.031569, a 90-day low, just 0.9% below its 3-month average of 0.031871, having traded in a very stable 3.6% range from 0.031569 to 0.032712. TWD/EUR is at 0.026813, 1.7% below its 3-month average of 0.027264, in a fairly stable 5.7% range from 0.026622 to 0.028151. TWD/GBP is at 0.023359, 1.9% below its 3-month average of 0.023807, with a stable 7.5% range from 0.023091 to 0.024829. TWD/JPY is 4.9482, 0.6% below its 3-month average of 4.976, trading in a narrow 3.6% range from 4.8782 to 5.0545.
What could change it
- A shift in Taiwan’s policy stance or unexpected intervention by the central bank (policy changes could re-anchor expectations and move the TWD quickly).
- A setback or improvement in US-China trade talks driving risk appetite and capital flows into or out of Taiwan.
- A material swing in USD-denominated asset hedging costs for Taiwanese insurers, affecting profitability and hedging behavior.
- Global risk sentiment shifts or domestic macro developments that alter export competitiveness or financial market conditions.
