Image Credits-Taipei Times
The New Taiwan dollar (NTD) continued its remarkable upward trajectory on the 20th, fueled by a combination of strong foreign capital inflows and a broader recovery in Asian currencies. This surge pushed the NTD to breach the significant psychological threshold of 31 yuan against the U.S. dollar, sending shockwaves through the financial markets.
The NTD’s appreciation has been particularly pronounced, with the currency gaining over 2% against the U.S. dollar in just the past month. On the 20th, the NTD opened at 31.05 yuan per U.S. dollar, quickly advancing to touch the 31 yuan mark. By mid-morning, the currency was trading at 30.98 yuan, marking its strongest level since early 2018. The rapid appreciation of the NTD has caught the attention of market participants, many of whom were unprepared for such a swift movement.
The influx of foreign funds has not only bolstered the stock market but has also strengthened the NTD, as investors convert their foreign currency into local currency to purchase assets. Central bank data shows that foreign exchange reserves in Taiwan have reached record levels, reflecting the robust demand for the NTD.
Despite the positive momentum, the rapid appreciation of the NTD has raised concerns among exporters, who fear that a stronger currency could erode their competitive edge in global markets. The Central Bank of the Republic of China (Taiwan) has been closely monitoring the situation, with officials indicating that they are prepared to intervene if necessary to curb excessive volatility in the currency markets.
Economists are divided on the outlook for the NTD, with some predicting that the currency could continue to strengthen in the near term, especially if foreign capital inflows persist. However, others caution that the NTD’s rally may be short-lived if global economic conditions deteriorate or if the U.S. dollar stages a comeback.
As the NTD continues to surge, market participants will be watching closely to see how the Central Bank responds and whether the current momentum can be sustained. The coming weeks are likely to be crucial in determining the future trajectory of the New Taiwan dollar, as well as its impact on Taiwan’s broader economy.