TAIPEI (Taiwan News) — The Taiwan dollar rallied against the US dollar on Thursday, closing at NT$29.66, its strongest level since late June 2022.
A lower exchange rate number reflects a stronger Taiwan dollar, as fewer Taiwan dollars are needed to buy one US dollar. The figure marked a 0.88% gain in a single day, the largest daily increase since early May, according to CNA.
The currency’s movement followed the release of lower-than-expected US consumer price index data for May, which indicated easing inflation pressures. This reinforced market expectations that the Federal Reserve may cut rates shortly to support economic growth, as slower inflation reduces the urgency to maintain high interest rates.
Rate cuts occur when a central bank lowers its benchmark interest rate, reducing borrowing costs and encouraging spending and investment to stimulate growth. The Taiwan dollar generally moves inversely to the US dollar, according to ThinkMarkets.
Foreign exchange traders observed that the Central Bank of Taiwan intervened to provide liquidity at critical levels, aiming to moderate the pace of the Taiwan dollar's appreciation.
Importers were also active buyers, which helped increase trading volume. Meanwhile, exporters appeared less reactive, partly because the Central Bank’s consistent signals about maintaining currency stability reassured them.
While a stronger Taiwan dollar benefits importers by lowering the cost of foreign goods, it presents challenges for Taiwan’s export-driven economy. Currency appreciation tends to raise prices of Taiwan’s exports in overseas markets, potentially affecting sales performance and reducing international competitiveness.
Since April, the Taiwan dollar has trended upward, with a notable rally in early May followed by periods of consolidation. Market participants indicated that recent gains were primarily driven by positive market responses to economic data.
Looking ahead, upcoming Central Bank meetings and developments in US-China trade negotiations could significantly influence market sentiment and the Taiwan dollar’s trajectory.
