Insights 
VT 
The USD/TWD pair remains under pressure, trading below the 29.50 mark during the Asian session. This follows a recent touch of a one-month low, despite an increase in the US Dollar’s appeal.
The Taiwan Dollar benefits from optimism surrounding easing US-China trade tensions and strong US technology stock performance. This places downward pressure on the USD/TWD pair, countering the US Dollar’s recent stabilisation.
Fed Meeting Outlook
Investors are cautious with the Federal Open Market Committee’s upcoming two-day meeting. Any potential rate cuts by the Fed in September could influence further losses for the USD/TWD pair.
Monetary policy in the US is directed by the Federal Reserve using tools like interest rate adjustments. The Fed holds eight policy meetings yearly to make these decisions. Quantitative easing and tightening are employed to either weaken or strengthen the US Dollar based on economic conditions. Quantitative easing facilitates credit flow during economic downturns, while quantitative tightening curtails it, typically boosting the US Dollar’s value.
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Though the pair finds itself lingering below the 29.50 threshold, with traders eyeing recent movements downward, we’re noticing that these trends come despite a minor pick-up in demand for the Dollar itself. It may seem contradictory on the surface, but when viewed through the lens of broader market sentiment—especially around trade relations and tech momentum—the picture clears up.
Trade Sentiment and Tech Sector Influence
Optimism around the easing of trade tensions between major global players continues to support confidence in regional currencies, and in this case, that confidence leans heavily in favour of the Taiwan Dollar. Overlay this with the recent gains in prominent US technology stocks, and you’ve got foreign exchange flows tipping in a direction that doesn’t necessarily track short-term indicators of Dollar strength. Many had anticipated firmer footing for the greenback, but the underlying forces here are acting faster and more decisively.
Looking ahead, it’s difficult to overstate how much traders are already adjusting to the upcoming Fed discussions. These two-day meetings have a strong history of causing immediate shifts in expectations, especially when policy outlooks begin to diverge from previous assumptions. Recent positioning suggests that participants are not ruling out the possibility that we’ll see rate adjustments, possibly as early as September, pending how labour data and inflation settle in the interim. So while current rates might hold firm, soft signals from the central bank could tilt the bias further against the Dollar, particularly for this pair.
We should remember that the Federal Reserve uses a handful of strategic policy levers, the most visible of which remains the benchmark interest rate. But equally consequential, albeit less widely covered, are the Fed’s balance sheet actions. When they expand holdings to support liquidity, financial conditions tend to loosen, which has historically removed some upward pressure on the Dollar. In contrast, when the Fed reduces its balance sheet, capital is effectively drawn out of the system, which tends to firm up the Dollar’s relative strength. Traders need to stay attuned to both sides of this equation.
Judging by where price action sits now, it appears markets are front-running a softer stance from the Fed, bolstered by external positivity rather than internal weakness. If upcoming statements lean dovish, that bias might deepen, particularly if inflation numbers move within a tolerable range. That would support a view of more gradual policy normalisation.
From our angle, closely tracking not just formal policy decisions but the tone and context of recent Fed speeches will be important. Any hints of patience, or data dependency in forward guidance, could weigh heavier than forecasts suggest. Therefore, model recalibrations should factor in revised timing for any future adjustments. Likewise, volatility in the derivative space might begin to reflect a more asymmetric risk profile if these themes continue to shape rate expectations.
In any case, these shifting currents are already being priced with an eye toward future movements, meaning current levels may not reflect the full spectrum of anticipated outcomes. Staying nimble with positioning, particularly in shorter-dated instruments, could be more beneficial than taking directional views based purely on Dollar sentiment.
