TAIPEI (Taiwan News) — The Taiwan dollar is expected to weaken against the US dollar this year, driven by sustained demand for the greenback, CTEE reported Wednesday.
Since the start of the year, the Taiwan dollar has depreciated by about 15 cents against the US dollar. Analysts attribute the early decline to continued foreign selling of Taiwanese equities, life insurers’ accounting adjustments under new standards, and sizable capital outflows linked to US investments.
Depreciation pressure is expected to persist as demand for the US dollar remains elevated. Uncertainty over the US Federal Reserve’s interest rate path and a temporary slowdown in rate cuts are also weighing on Asian currencies.
Several financial institutions expect the Taiwan dollar could weaken to around NT$32 per US dollar, compared with NT$31.65 on Wednesday. Taiwan’s planned NT$7.9 trillion (US$250 billion) investment in the US, backed by government credit guarantees, is expected to support long-term demand for dollars.
Life insurers’ accounting changes are also influencing the currency. To comply with rules that went into effect earlier this year, insurance companies may scale back strategies that normally hedge against currency swings, increasing their need for US dollars.
The possibility of a Taiwan Central Bank rate cut this year to support domestic liquidity has become a closely watched factor by investors. Many institutions expect a low-rate, low-yield environment this year, which could further weigh on the Taiwan dollar.
A banking executive noted that recent economic data has had a limited impact on currency movements, with capital flows remaining the main driver. Foreign investors currently hold a high proportion of Taiwanese equities and have frequently taken profits during market peaks.
The executive suggested watching major currencies in the short term, especially the Japanese yen. He noted that the Bank of Japan’s policy meeting this week, together with Prime Minister Takaichi Sanae’s upcoming dissolution of parliament, could create yen volatility, potentially impacting other Asian currencies.
