In the past two trading days, the New Taiwan Dollar has appreciated nearly 7% against the US dollar, with the latest single-day increase reaching 2.5%, shocking the foreign exchange market. However, amidst such severe fluctuations, the Taiwan Central Bank chose to remain inactive, without any apparent intervention. Does this conceal a complex geopolitical and international trade struggle?
Market Shockwave: New Taiwan Dollar Soars to Two-Year High
According to Bloomberg, the New Taiwan Dollar soared nearly 7% in two days, marking the largest single-week increase in two years, with a single-day increase reaching 2.5%. This surge took the market by surprise and raised questions about why the Taiwan Central Bank did not intervene in a timely manner. In the past, when faced with such severe exchange rate fluctuations, the Taiwan Central Bank typically intervened to stabilize the market, but this time it remained unusually silent.
Emerging US Factors: Is the Exchange Rate a Potential Negotiating Chip?
Market analysis indicates that the US and Taiwan are negotiating a bilateral trade agreement, and the appreciation of the New Taiwan Dollar may be related to this. Taiwan has maintained a large trade surplus with the US over the long term, especially in the semiconductor sector, with TSMC making significant contributions. Some believe that the US may be questioning Taiwan's 'weak currency policy,' viewing it as a form of non-tariff trade barrier. If this is the case, the Taiwan Central Bank's decision not to intervene in the appreciation may be to reduce friction during negotiations.
A Double-Edged Sword: Consumers Rejoice, Exporters Suffer
The appreciation of the New Taiwan Dollar is beneficial for imported goods; for example, the cost of tapioca pearls imported from China, a favorite drink among Taiwanese, will decrease, and consumers can expect cheaper beverages. However, for export-oriented industries like semiconductors, it's a different story. TSMC pointed out last week that for every 1% appreciation of the Taiwan dollar, its operating profit margin will be compressed by nearly 0.5 percentage points. With the current 7% appreciation, TSMC's profits may face significant impacts, posing a major challenge for the overall export industry.
Exchange Rate Fluctuations Sweep Across Asia; Funds Are Accelerating Back to Local Markets
Bloomberg's Asia Market Executive Editor Paul Dobson points out that this wave of exchange rate fluctuations is not limited to Taiwan. Exporters in many Asian countries are facing pressure from the weakening dollar, leading to a large inflow of funds from dollar accounts back to their home countries to avoid exchange losses. The Malaysian Ringgit has also seen a significant appreciation recently, following a similar trend to the Taiwan dollar. Chinese exporters are also beginning to change their long-standing strategies from holding dollar assets to holding local currency, further intensifying regional currency appreciation pressures.
Can Hong Kong Hold Out? Monetary Authority's Record Intervention
Apart from Taiwan, the Hong Kong Monetary Authority bought a record amount of US dollars last weekend to maintain the peg between the Hong Kong dollar and the US dollar. This highlights that the entire Asia is undergoing a wave of currency revaluation, especially against the backdrop of the US dollar possibly entering a long-term depreciation trend, drawing attention to the intervention strategies of various central banks.
Does Falling Oil Prices Benefit the Asian Economy? Effects Vary by Country
At the same time, the decline in international oil prices has had varying effects on different Asian countries. For energy-importing countries like Taiwan, falling oil prices combined with a strong currency will enhance purchasing power, helping to lower import costs. However, for oil-exporting countries like Malaysia, they may simultaneously suffer from the dual impact of falling oil prices and currency appreciation, hurting export revenues.
Is the US-China Trade Atmosphere Warming Up? Asian Markets Are Watching Closely
Although the current fluctuations in Asian markets are closely related to currency appreciation, the market is also closely watching the latest developments in US-China relations. Paul Dobson points out that Washington's friendly signals regarding the resumption of negotiations with China have led Asian investors to adopt a cautiously optimistic attitude. If both sides can ease trade tensions, it would be a significant boon for the Asian market. However, in the low liquidity early trading session in Asia, any statements or policy changes from the US may be amplified, causing severe short-term market volatility.
This article has shocked foreign media! The New Taiwan Dollar skyrocketed nearly 7%, and the Central Bank remained inactive. What calculations are hidden behind this analysis by Bloomberg? First appeared in Chain News ABMedia.
