The Taiwan Dollar is moving erratically again: What's behind its appreciation?

출처 Fxstreet

The volatility surrounding the New Taiwan Dollar (TWD) remains extremely high as investors assess trade-related news against the exposure of Taiwan’s life insurance companies’ to US Dollar(USD)-denominated assets. After falling nearly 5% on Thursday, the USD/TWD pair rebounded and was last seen trading near 29.50, losing about 1.5% on the day.

The USD/TWN resumed its downtrend on Thursday. Source: FXStreet.

Such sudden moves are rare for a currency that usually barely attracts headlines: What could the recent surge of the Taiwan Dollar be telling us?

Optimism about trade talks benefits Taiwan

One could think that the move responds to a better outlook regarding tariff talks between the US and China. At the end, the Taiwan Dollar surely benefits from easing trade tensions and the relatively upbeat performance of technology stocks in the US.

This is because Giants such as Apple, Nvidia and Qualcomm rely heavily on semiconductors supplied by the TSMC (Taiwan Semiconductor Manufacturing Company).

Recent inflation data from the US may have also contributed to the strength of the Taiwanese Dollar. Lower-than-expected US inflation data on Wednesday hurt the US Dollar and US Treasury bond yields, leading to capital outflows from the USD and toward, among others, the TWD.

Although the current environment seems advantageous for the Taiwanese economy – and its key chip sector – to continue to expand at a healthy pace, the appreciation of the Taiwan Dollar could have some adverse effects.

The role of Taiwanese life insurers

According to Bloomberg, there is another key factor that could be influencing the market beyond the trade talks: Taiwan’s life insurance companies have more than 90% of their overseas assets denominated in the US Dollar, unlike many other insurers in other countries that diversify their portfolios. This exposure of Taiwan’s insurers puts them under significant threat of financial losses when the Taiwan Dollar appreciates against the USD.

“Taiwan is at the epicenter of this massive dollar long held by institutional investors. With TWD having another large move today, we should be under no doubt that global pension funds and life insurers are watching closely as to how the unwind of this dollar imbalance plays out and what lessons they should be drawing for their own portfolios,” analysts at Deutsche Bank said.

There are few signs that insurers are readying a major overhaul of their investment model given the limited size of the Taiwanese financial market and their dependence on regulatory support when times are tough, Bloomberg wrote.

“That means the sector’s $4 billion currency loss between January and April and some of its biggest players’ worsening earnings woes may only mark the start of more shocks, raising questions of systemic risks to the island’s finances and retirement savings,” it added.

Earlier in May, USD/TWD lost nearly 10% in a two-day span and touched its weakest level in nine months below 28. The pair rose about 6% in the following days as the Governor of the Central Bank of Taiwan noted that they had stepped in to curb what it deemed as “excessive” inflows.

Back then, many speculated that the central bank had negotiated with the US a weakening of the currency as part of negotiations to secure a beneficial trade deal with the Trump administration. Taiwan denied such rumours.

It is currently unclear whether the central bank is intervening in the foreign exchange markets. But investors could be refraining from betting on a further appreciation of the Taiwan Dollar given the risk of getting caught on the wrong foot in case of an intervention.

면책 조항: 정보 제공 목적으로만 사용됩니다. 과거 성과가 미래 결과를 보장하지 않습니다.
placeholder
암호화폐 시장, 라이트코인·솔라나·XRP·도지코인·카르다노 현물 ETF 마감 앞두고 안정세월요일 보도 시점 기준, 전체 암호화폐 시가총액은 3.8조 달러로 전일(일요일) +2.29% 상승 이후 보합권을 유지하고 있다.
저자  FXStreet
10 시간 전
월요일 보도 시점 기준, 전체 암호화폐 시가총액은 3.8조 달러로 전일(일요일) +2.29% 상승 이후 보합권을 유지하고 있다.
placeholder
금 가격 전망: 미 정부 셧다운 가능성 속 XAU/USD, 3,820달러로 랠리월요일 유럽장에 3,819달러의 사상 최고가를 경신한 뒤, 금은 3,800달러 상단에서 거래 중이다. 귀금속 전반이 강세를 보이고 달러가 약세로 돌아서며, 투자자들은 수요일 예정된 미 연방정부 셧다운 가능성에 대비하고 있다.
저자  FXStreet
10 시간 전
월요일 유럽장에 3,819달러의 사상 최고가를 경신한 뒤, 금은 3,800달러 상단에서 거래 중이다. 귀금속 전반이 강세를 보이고 달러가 약세로 돌아서며, 투자자들은 수요일 예정된 미 연방정부 셧다운 가능성에 대비하고 있다.
placeholder
Silver Price Forecast: 미 정부 셧다운 우려 속 XAG/USD, 47.00달러로 랠리 지속월요일, 은(XAG/USD)은 상승세를 이어가고 있다.
저자  FXStreet
10 시간 전
월요일, 은(XAG/USD)은 상승세를 이어가고 있다.
placeholder
솔라나 가격 전망: 스폿 솔라나 ETF S-1 수정 제출에 심리 개선… SOL, $210 회복Solana(SOL)는 지난주 핵심 지지에서 반등한 뒤 월요일 $210 상단에서 거래 중이다. 이번 회복은 주요 자산운용사들의 스폿 솔라나 ETF S-1 수정 제출이 연달아 나오면서 탄력을 받았다.
저자  FXStreet
13 시간 전
Solana(SOL)는 지난주 핵심 지지에서 반등한 뒤 월요일 $210 상단에서 거래 중이다. 이번 회복은 주요 자산운용사들의 스폿 솔라나 ETF S-1 수정 제출이 연달아 나오면서 탄력을 받았다.
placeholder
상위 3개 가격 전망: 비트코인·이더리움·리플 – 핵심 지지선 방어 속 BTC·ETH·XRP 반등 시도이번 주 초 비트코인(BTC), 이더리움(ETH), 리플(XRP) 은 최근 조정 이후 각각 주요 지지선 위에서 버티며 안정화 조짐을 보이고 있다.
저자  FXStreet
13 시간 전
이번 주 초 비트코인(BTC), 이더리움(ETH), 리플(XRP) 은 최근 조정 이후 각각 주요 지지선 위에서 버티며 안정화 조짐을 보이고 있다.
goTop
quote