The Taiwan dollar surged nearly 8% over two days to its highest level in more than two years, marking a rare and dramatic move in Asia's currency markets that traders are attributing to fallout from President Donald Trump's escalating tariff measures and mounting pressure on key trading partners.
The Taiwan dollar closed at NT$30.145 against the U.S. dollar on Monday, capping a record rally that some market participants described as the fastest appreciation in recent memory. "The Taiwan dollar is appreciating at a faster pace than I've ever seen," said a senior Taiwanese financial executive, speaking anonymously due to media restrictions. "Hot money is coming into Taiwan, and the central bank is allowing it. Many are saying that's due to pressure from the U.S. I would say that must be the case."
Although the precise trigger remains unclear, the rally coincided with the conclusion of U.S.-Taiwan trade talks in Washington. Market speculation swirled around a potential, if unacknowledged, agreement to weaken the greenback in exchange for trade concessions-a theory both Taiwan's central bank and trade office deny. Taiwan President Lai Ching-te on Monday urged the public not to "spread fake stories about foreign exchange rate talks with the United States."
The Central Bank of the Republic of China (Taiwan) emphasized that the U.S. had not asked for currency appreciation and attributed recent moves to foreign fund inflows and corporate hedging. "The (U.S. dollar) selling interest originates onshore," said Tareck Horchani, head of prime brokerage dealing at Maybank Securities in Singapore. He explained that exporters and insurers were selling dollars to manage exposure as U.S. dollar-denominated assets fell in value.
Taiwan's dollar rally emerged as part of a broader Asian trend. As of late April, the Japanese yen had climbed nearly 10% against the greenback, the Korean won rose 3.61%, and the Taiwan dollar gained 2.39%, driven in part by the U.S. dollar index (DXY) falling below the 100 mark. That drop followed President Trump's April 2 announcement of high "reciprocal" tariffs targeting countries with large U.S. trade surpluses, including Taiwan.
Last Friday, Taiwan's currency jumped NT$0.953, or 3.07%, to close at NT$31.064, its highest since January 9. On Monday, it surged again, reaching NT$29.675 at one point in morning trading before settling back. The currency's rapid ascent-described by BNY Investment Institute's Aninda Mitra as a "19-standard-deviation event"-underscores the sensitivity of capital flows in politically charged environments.
Currency manipulation concerns loom over the moves. Taiwan has been on the U.S. Treasury Department's currency "watch list" for six consecutive reports, meeting at least two of the three criteria for monitoring: a bilateral U.S. trade surplus over $15 billion and a current account surplus exceeding 3% of GDP. Although the central bank denies any intervention, analysts say the timing and scale suggest tacit approval.
Still, analysts say there's a limit. "There is no room for appreciation to NT$28.00," said a foreign exchange analyst who spoke with CNA on condition of anonymity. Chen Yu-chung, FX analyst at Taishin International Bank, added that hot money outflows had reversed since Trump paused tariff hikes for 90 days, excluding China. "Foreign investors have turned to net buying," Chen said, citing a stock rebound and dollar softness as factors supporting the Taiwan dollar.
The rally has sparked debate about whether the Taiwan dollar's strength signals a broader shift away from the U.S. dollar in emerging Asia. "A weak dollar is certainly an integral part of their strategy," said Sunil Kalra, portfolio manager at LC Beacon Global Fund. "The stars are aligned... is it finally time for this to spread into emerging markets, especially Asian EM, which has lagged?"
