USD\/TWD has climbed for five straight sessions, up 0.1% to 31.68, as foreign equity outflows gathered pace during a global tech sell-off. On a net basis, foreign investors sold USD8.8bn of equities in the first three days of the week, while the TAIEX is down 4.1% so far this week. Against that backdrop, trade data remained strong: May exports jumped 51.7% year on year versus a Bloomberg consensus of 41.2% and 39.0% in April, extending a fifteenth consecutive month of double-digit growth. Integrated circuit exports rose 58.3%, up from 40.5% in April, and imports increased 54.9% against expectations of 40.3% after 29.2% previously, with capital goods imports up 54.7% versus 33.3% in April. The trade surplus widened to USD17.9bn, above the USD17.5bn consensus and up from USD14.4bn.<\/p>\n
Inflation has also firmed. Headline inflation averaged 1.5% in the first five months, and the government projects 1.9% for this year, while May CPI printed at 2.2% year on year versus a 2.1% consensus and 1.7% in April, moving above the central bank\u2019s 2% target for the first time since March 2025. Even so, the Central Bank of the Republic of China (CBC) is expected to leave its policy rate unchanged at 2% at its 18 June meeting. Year-to-date, the Taiwan dollar is down 0.8% versus the USD, compared with an average 2.8% decline for Asian currencies ex-Japan.<\/p>\n
We see the USD\/TWD pair continuing its upward trend, driven by significant outflows from Taiwanese equities. A global correction in technology stocks, with the NASDAQ Composite falling over 7% in the last two weeks, is prompting foreign investors to pull capital out of the region. This short-term sentiment is currently the dominant force in the market.<\/p>\n
We do not expect any support for the TWD from the central bank meeting on June 18th. Despite May’s inflation hitting 2.2%, the CBC has signaled it will hold its policy rate at 2%, a level maintained for the past year. This dovish stance, prioritizing stability amid global uncertainty, suggests the bank will tolerate higher inflation for now.<\/p>\n
Given this environment, we are looking at short-term derivative positions that favor continued TWD weakness. Buying USD\/TWD call options with expirations in late June or July appears to be a prudent strategy. This allows us to profit from the ongoing upward momentum in the currency pair through the upcoming central bank decision.<\/p>\n
However, we must watch the fundamental picture, which tells a very different story of incredible strength. Taiwan’s exports are surging on AI-related demand, with recent data from the Ministry of Finance showing semiconductor exports now account for over 40% of the total. This underlying economic power, driven by a global AI infrastructure build-out, creates a strong floor for the TWD in the medium term.<\/p>\n
We will be closely monitoring the TAIEX and foreign fund flow data for signs of stabilization. Historically, such tech-driven outflows can reverse quickly once global sentiment shifts, as seen in the sharp rebound following the 2022 downturn. A break below key support levels in the USD\/TWD pair could be a signal to consider put options to position for a TWD recovery.<\/p>\n","protected":false},"excerpt":{"rendered":"
USD\/TWD extends five-day rise to 31.68 on tech-led equity outflows, despite strong exports and firmer inflation.<\/p>\n","protected":false},"author":87,"featured_media":47724,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[71],"tags":[],"class_list":["post-48775","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-live-updates"],"acf":{"acf_article_selection_author":null},"aioseo_notices":[],"aioseo_head":"\n\t\t\n\t\n\t\n\t\n\t\n\n\t\t