The Taiwan dollar has remained under pressure, with USD/TWD moving above 32, as demand for the US dollar has been driven by foreign equity selling and seasonal dividend and profit-remittance flows rather than weaker domestic fundamentals. The central bank has described the move as largely USD-led, while also pointing to portfolio flows and elevated Taiwan equity valuations, and has reportedly asked local banks to execute large USD sell orders on the same day to accelerate natural supply and temper depreciation pressure.
Technical indicators still show bullish momentum in USD/TWD, with the RSI in overbought territory, leaving room for upside risks alongside the possibility of a snapback. Resistance is flagged at 32.22, described as the 76.4% Fibonacci retracement of the 2025 high-to-low move, with further levels at 32.50/60. Support sits at 31.95 and 31.76, the 21-day moving average. In the near term, the currency remains sensitive to continued outflows and firm USD sentiment into the FOMC minutes, although exporter USD selling and official guidance may reduce the risk of a disorderly rise in USD/TWD.
Temporary Flows Versus Domestic Fundamentals
The USD/TWD exchange rate is holding above 32, but we see this as driven by temporary flows rather than weak fundamentals. Taiwan’s export orders for June 2026 actually rose 3.5% year-over-year, indicating the underlying economy remains solid. The main pressure is coming from dividend season and foreign equity selling.
Foreign investors sold a net US$4.6 billion from local equities last month, which explains the strong seasonal demand for the US dollar. This aligns with the peak dividend payout season for major tech firms, creating a predictable rush for dollars. We see the central bank is now trying to bring more natural USD supply to the market to counter this pressure.
Market Strategies and Central Bank Intervention
Given the central bank’s clear intention to prevent a disorderly spike, we believe the upside is likely capped near the 32.50/60 resistance area. This makes selling volatility an attractive option for derivative traders in the coming weeks. A bear call spread, selling a call at 32.50 and buying one higher up, could be a prudent way to capitalize on this view.
We also cannot rule out a snapback towards the 31.95 support level if the central bank’s guidance proves effective. This reminds us of the interventions seen in late 2024 when the bank actively defended similar levels, showing their willingness to step in. Therefore, buying short-dated put options could serve as a tactical play for a quick reversal.
