Taiwan Dollar: Trade boom contrasts FX stability – ING

ING’s Lynn Song highlights Taiwan’s record trade performance, with the September surplus hitting US$23.6bn on a 60.9% year-on-year export surge, largely driven by tech-related machinery and electrical equipment. Despite strong exports, equities and foreign inflows, the Taiwan Dollar has remained relatively subdued, reflecting outward corporate investment, capital outflows due to yield differentials, and active FX stability measures by Taiwan’s central bank.

Record surplus yet muted currency

"Despite the record-breaking trade surpluses and a strong year for the Taiwanese equity market drawing heavy foreign inflows, the Taiwan dollar has not shown the strength that one may expect with these sorts of conditions."

"This is likely tied to two main factors: Taiwanese corporates expanding outward investment as they seek to expand production capacity, and capital outflows thanks to the significant yield spread between Taiwan and developed markets such as the US."

"Against this backdrop, Taiwan's Central Bank of China has also taken measures to ensure FX stability."

"With yesterday's inflation coming in hot at 2.7% YoY and today's strong trade data suggesting growth remains strong, we think there's a solid case for the CBC to hike at its December meeting, though there's still a long way to go between now and then."

"Taiwan continues to be one of the main beneficiaries of higher tech prices globally, with export prices rising 25.8% YoY in September."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)