Taiwanese Dollar Slides Back to May Lows

The Taiwan dollar surged over 2% to 29.17 per U.S. dollar in another volatile session on Tuesday, with traders attributing the rally to expectations of upcoming Fed rate cuts, broad dollar weakness, and sustained foreign capital inflows into the island.

The gain pushed the local currency’s year-to-date gain to 12%, cementing its status as Asia’s best-performing currency in 2025.

Strength in the Taiwan dollar has been underpinned by resilient tech exports—particularly semiconductors—and growing foreign interest in Taiwanese equities, fueled by optimism surrounding AI-driven demand.

The central bank’s hands-off approach has led to speculation that authorities may be tolerating a stronger currency to curb imported inflation.

However, the rapid appreciation has begun to raise concerns among exporters, who are grappling with shrinking margins.

Market participants now await signals from the central bank as the currency’s surge continues to test the limits of monetary policy patience.

The Taiwanese dollar slid past 30 per US dollar on Tuesday, snapping a two-day rally and retreating from a near three-year high reached in the previous session.

The recent surge was driven by speculation that the appreciation of Asian currencies, including the Taiwanese dollar and Malaysian ringgit, might be part of broader efforts to accelerate trade deals with the US. However, Taiwan’s central bank denied making any such deal, stating that the US had not asked for a stronger Taiwan dollar, while President Lai Ching-te urged people not to spread false information about alleged currency talks with the US. Taiwan is a major producer of high-end computer chips, with significant exports to both the U.S. and China, making it especially sensitive to shifts in global trade dynamics.

The Taiwanese dollar strengthened to around 29.6 per U.S. dollar on Monday, extending its gains from the previous week and reaching its highest level since June 2022.

The currency outperformed most of its Asian peers amid speculation that the Trump administration is pressuring regional economies to allow currency appreciation against the greenback.

Domestically, Taiwan’s economic outlook improved significantly.

Preliminary estimates showed GDP expanded by 5.37% year-on-year in the first quarter of 2025, far surpassing market expectations of 3.3% and up from 2.9% in the previous quarter.

This marked the strongest growth in a year, underpinned by robust domestic demand and a positive contribution from net exports, which benefited from shifts in global trade patterns following the announcement of new U.S. tariffs.