The Taiwan Dollar (TWD) has experienced renewed weakness, with the USD/TWD exchange rate rising above the 32 level, according to OCBC Bank analysts Sim Moh Siong and Christopher Wong. This depreciation is attributed primarily to foreign equity selling and increased demand for US Dollars related to dividend and profit remittance flows, rather than a deterioration in Taiwan's domestic fundamentals [1]. The Central Bank of the Republic of China (CBC) has characterized the recent FX weakness as largely driven by USD strength, but also highlighted portfolio flows and high Taiwan equity valuations as contributing factors [1].
In response, authorities are encouraging local banks to expedite the execution of large USD sell orders, aiming to mobilize natural USD supply and mitigate depreciation pressure on the TWD. Exporter USD selling and CBC guidance are expected to help reduce the risk of a disorderly spike in USD/TWD, even as technical analysis indicates persistent bullish momentum and overbought conditions on the daily chart. Key resistance levels are identified at 32.22 and 32.50/60, with support at 31.95 and 31.76 [1].
Looking ahead, the TWD may remain vulnerable if foreign equity outflows continue and USD sentiment remains strong, particularly in the lead-up to the FOMC minutes. However, the presence of exporter-driven USD supply and policy measures to smooth FX execution may help temper the risk of further sharp depreciation [1].
CONCLUSION
The Taiwan Dollar's recent weakness is primarily flow-driven, with foreign equity outflows and seasonal USD demand outweighing domestic fundamentals. Policy measures by the CBC and exporter USD selling may help stabilize the currency, but near-term vulnerability persists if outflows continue.