Foreign hot money staged a full-scale retreat on Monday, sending the Taiwan dollar plunging NT$0.16 against the U.S. dollar — its steepest single-day drop in more than six months — with the closing price of NT$31.848 also marking a near three-week low. Foreign exchange bankers revealed that foreign investors were effectively “selling from open to close,” with foreign capital outflows alone exceeding $2 billion (approximately NT$64 billion). Combined turnover across the Taipei and Yuan Tai foreign exchange markets swelled to $3.744 billion (approximately NT$120 billion).
The Taiwan dollar opened at NT$31.71 before selling pressure immediately emerged, with the exchange rate successively breaching the NT$31.8 and NT$31.9 round-number levels. At its intraday low, the currency touched NT$31.906, a drop of more than NT$0.20. Fortunately, Taiwan’s Central Bank stepped in during late trading to smooth volatility, visibly narrowing the decline. The currency ultimately settled at NT$31.848, down NT$0.16, for a single-day loss of 0.5% — the heaviest in over half a year.
Foreign exchange traders noted that the selling pressure was remarkably one-directional. “By feel alone, foreign investor outflows exceeded $2 billion in turnover,” one trader said. Although exporters did enter the market to sell U.S. dollars at certain points during the session, they turned cautious as the decline accelerated, with selling interest visibly weakening. The Taiwan dollar’s depreciation extended further in the afternoon, briefly breaking below NT$31.9.
Multiple headwinds converge, pressuring equities and the currency simultaneously
The Taiwan stock market opened lower and fluctuated throughout the session, ultimately closing down 351.03 points at 45,511.49 on the year’s second-lowest turnover. Foreign investors posted a fourth consecutive session of net selling, offloading an additional NT$62.699 billion (approximately $2.0 billion) worth of Taiwanese shares in a single day. Cumulative withdrawals have now surpassed NT$220 billion, creating substantial depreciation pressure on the currency market.
Behind the rising risk-aversion sentiment lies a confluence of multiple bearish factors. Investor concerns over AI development have resurfaced, with tech giants calling for a slowdown in AI advancement. U.S. stocks weakened in response, with the Philadelphia Semiconductor Index plunging nearly 6%. Meanwhile, escalating tensions in the Middle East have kept international oil prices above $100 per barrel (approximately NT$3,200), with inflation concerns lingering. Markets are increasingly pricing in the likelihood that the U.S. Federal Reserve will resume rate hikes this week, with U.S. Treasury yields breaching 5% and the US Dollar Index extending its upward momentum.
Super Central Bank Week kicks off; markets hold their breath
Global financial markets are bracing for a “Super Central Bank Week,” with the U.S. Federal Reserve, Bank of Japan, and Bank of England all scheduled to announce interest rate decisions in succession. Market expectations for a Fed rate hike have shifted from “possibly hiking” to “a hike is highly likely,” with some traders even beginning to bet on more than one increase.
Foreign exchange expert Li Qizhan noted that market uncertainty has risen markedly, with persistently climbing international oil prices further intensifying expectations that the Fed will resume tightening. He emphasized that this week’s central bank rate decisions are critically important: if the Fed signals a hawkish stance or announces a rate hike, the US Dollar Index will receive strong support and push higher, potentially exposing the Taiwan dollar to greater depreciation pressure.
Li forecasts that the Taiwan dollar will likely consolidate within a range of NT$31.2 to NT$32 in the near term, and a break below the NT$32 threshold cannot be ruled out.
Foreign exchange bankers believe that beyond the Fed’s trajectory, policy decisions from the Bank of Japan and Taiwan’s Central Bank also warrant close attention. If the Bank of Japan accelerates its rate-hike pace, it will influence international capital flows. The policy directions of both central banks and market reactions will serve as key indicators for the outlook on Taiwanese equities and the currency. Additionally, market sentiment toward AI and other technology stocks, as well as foreign investor positioning, will remain important factors affecting the Taiwan dollar exchange rate.
Asian currencies broadly under pressure; Chinese yuan bucks the trend
Against the backdrop of a strengthening US Dollar Index, major Asian currencies broadly weakened. According to Taiwan’s Central Bank statistics, as of 4 p.m. Monday, the US Dollar Index had risen 0.44%. The Singapore dollar posted the largest decline among Asian currencies at 0.22%, followed by the Taiwan dollar at 0.16%, the Japanese yen at 0.11%, and the Korean won at a modest 0.04%. In contrast, the Chinese yuan edged up 0.03%, with both onshore and offshore yuan advancing to near 44-month highs, providing some support to Asian currencies.
Foreign exchange bankers analyzed that although the US Dollar Index has strengthened, the European Central Bank announced a quarter-point rate hike last week, and markets expect the Bank of Japan to accelerate its tightening pace. Support for the euro and yen has partially offset dollar gains, meaning the greenback’s advance has not been particularly aggressive and overall declines in Asian currencies have remained relatively contained.
Given elevated uncertainty surrounding global central bank policy, markets may shift to a wait-and-see stance in the near term. Taiwan’s Central Bank is expected to continue intervening appropriately to maintain exchange rate stability. Foreign exchange bankers believe the Taiwan dollar could break below the NT$31.8 level in the short term, but is more likely to consolidate within the NT$31.5 to NT$32 range as markets await this week’s succession of central bank rate decisions.
