The Taiwan Dollar (TWD) has come under pressure as the USD/TWD exchange rate rose for five consecutive sessions to 31.68, primarily driven by foreign equity outflows amid a correction in global tech stocks [1]. Commerzbank highlights that foreign investors sold a net USD 8.8 billion of Taiwanese equities in the first three days of the week, contributing to a 4.1% decline in the TAIEX index so far this week [1]. Year-to-date, the TWD has depreciated 0.8% against the USD, which is less than the average 2.8% decline for Asian currencies excluding the Japanese yen [1].
Despite the currency weakness, Taiwan's trade data remains robust. May exports surged 51.7% year-on-year, significantly exceeding the Bloomberg consensus of 41.2% and up from 39.0% in April. Integrated circuit exports, a key driver, soared 58.3% compared to 40.5% in April, fueled by strong demand for advanced chips used in AI applications [1]. Imports also surprised to the upside, rising 54.9% year-on-year versus a consensus of 40.3% and 29.2% in April, reflecting strong investment momentum. Capital goods imports increased 54.7% compared to 33.3% in April. As a result, the May trade surplus widened to USD 17.9 billion, beating the consensus estimate of USD 17.5 billion and up from USD 14.4 billion in April [1].
Inflationary pressures are mounting, with May CPI rising 2.2% year-on-year (consensus: 2.1%) compared to 1.7% in April, marking the first time since March 2025 that inflation has exceeded the Central Bank of the Republic of China’s (CBC) 2% target [1]. Headline inflation averaged 1.5% in the first five months of the year, and the government projects 1.9% for the full year [1].
Despite these inflationary signals, the CBC is expected to keep its policy rate unchanged at 2% at the upcoming meeting on 18 June. Policymakers, including CBC Governor Yang Chin-long, have indicated comfort with the current monetary stance, noting that headline CPI remains relatively stable and that a temporary breach of the 2% target does not necessarily justify a rate hike [1].
CONCLUSION
The Taiwan Dollar is facing downward pressure due to significant foreign equity outflows and rising inflation, even as trade data remains exceptionally strong. The central bank is expected to maintain its current policy rate, signaling confidence in its monetary stance despite recent inflationary pressures. Market sentiment remains cautious given the ongoing tech sector correction and capital outflows.