Taiwan dollar soars 6.5% in two-day rally amid trade deal uncertainty

When trading opened on Monday, Taiwan’s currency extended its gains by another 2.5% against the U.S. dollar. The Taiwan dollar has surged by 6.5% in two days, the largest two-day jump in decades.

The country’s currency has also risen by almost 10% since the start of April. The jump in price comes as life insurers moved to hedge their exposed U.S. portfolios and markets feared that a trade deal with Donald Trump might include the exchange rate.

Taiwan dollar jumps 6.5% in two days

The Taiwan dollar has strengthened an extraordinary 7.5% in two trading sessions (Fri and today). Part of ongoing USD weakness trend post liberation day? Or something bigger brewing? Either way – will def have hurt a few market players. pic.twitter.com/Oh5Qn0RUqc

— Wilfred Frost (@WilfredFrost) May 5, 2025

The Taiwan dollar recorded an uptick of 2.5% as trading opened on Monday, marking its two-day gain at 6.5%. The currency has also realized a 10% surge since the start of April and the beginning of Trump’s trade policies. 

The currency’s jump shows how the impact of the U.S. trade war is rippling through the global economy.

Ju Wang, a strategist at BNP Paribas in Hong Kong, argued that the sudden currency movement could harm the competitiveness of the island’s export-oriented economy and expose Taiwanese life insurers to losses through their holdings of U.S. assets.

BNP’s strategist noted that local exporters were panicking and local lifers were under-hedged, while equity-related outflows have ceased. Wang also acknowledged that the Taiwan central bank remains the only buyer but has not been aggressively supporting the market. She believes it has fueled speculation that currency valuation is part of the trade talks.

The country has a huge pile of overseas assets amounting to $1.7 trillion. Much of the assets are in the form of U.S. bonds, including Treasuries and corporate debt, held by life insurers.

Wang also noted many of those insurers have not hedged their currency exposure, which exposes them to losses when the U.S. dollar falls. She argued that a rush to hedge those risks in a falling market might have worsened the currency’s move. 

Taiwan’s president calls for end of ‘false’ news about U.S. FX talks

Wang also maintained that the currency jump has been heightened by speculation that a possible trade deal with the U.S. could include provisions to strengthen the Taiwanese currency and make it less competitive.

Taiwan’s central bank released a statement on Friday denying claims that the U.S. Treasury Department had requested an appreciation in its currency as part of a trade deal.

Wang argued that despite no economy officially acknowledging that currency valuation is a point of negotiation, market expectations still indicated otherwise. She believes it is notable given the Mar-a-Lago [accord]’s emphasis on an overvalued U.S. dollar being a root cause of the U.S.’s trade imbalances.

The East Asian country is currently the seventh-largest U.S. trading partner, driven by its globally competitive semiconductor sector. TSMC’s stock, the world’s biggest contract semiconductor producer, dropped by 1.3% on Monday. The country recorded a trade surplus of $74 billion with the U.S. in 2024. 

Taiwan’s President Lai Ching-te said the country’s trade surplus with the U.S. is because of soaring demand for the tech products the island specializes in, like semiconductors. He also acknowledged that Washington had never listed Taiwan as a currency manipulator.

“Precisely because the cause of the Taiwan-U.S. deficit has nothing to do with the exchange rate, the exchange rate issue will naturally not be mentioned in negotiations between Taiwan and the United States.”

-Lai Ching-te, Taiwan’s President.

The U.S. dollar was down 0.44% on the Japanese yen at 144.3 on Monday. The Australian dollar also hit a five-month high in early trade and was up 0.4% at 0.6473. The U.S. dollar also plummeted over 3% against the Taiwan dollar to 29.772, adding to a record 4.4% move on Friday. The President also noted that Taiwan’s economy was doing well and people should have confidence.

The country’s Office of Trade Negotiations has also denied that the White House was pressing for a rise in some Asian currencies as part of a trade deal, which might have caused the markets to shift. 

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