The New Taiwan dollar and Taiwanese stocks surged on signs that trade tensions between the world’s top two economies might start easing and as US tech earnings boosted the outlook of the nation’s semiconductor exports.
The NT dollar strengthened as much as 3.8 percent versus the US dollar to 30.815, the biggest intraday gain since January 2011, closing at NT$31.064. The benchmark TAIEX jumped 2.73 percent to outperform the region’s equity gauges.
Outlook for global trade improved after China said it is assessing possible trade talks with the US, providing a boost for the nation’s currency and shares. As the NT dollar appreciated, local exporters rushed to convert US dollars to the currency, while typical buyers of the greenback stepped back from the market, creating a feedback loop that exaggerated the move, traders said.
Photo: CNA
Still, there was no aggressive or abnormal intervention by the central bank, traders said. The monetary authority usually intervenes to iron out volatility amid wild swings in the currency market.
“The faster-than-expected pace of Taiwan dollar appreciation caught many market participants off guard, prompting a rush to convert US dollars into local currency,” said Christopher Wong, a strategist at OCBC Bank. “The recent Taiwan dollar gains have also been catalyzed by prospects of dialog between US and China.”
The NT dollar’s rally has propelled it to the top of emerging Asian currency rankings this year, with a gain of nearly 6 percent versus the greenback. Other Asian currencies have also advanced amid the trade optimism, with the South Korean won and Indonesian rupiah up more than 1 percent yesterday.
The surge in the NT dollar is backed by largest volumes for greenback-NT dollar non-
deliverable forwards, which are making a rare appearance at the top of global trading charts.
The central bank reiterated on Thursday that the US Treasury has not asked Taiwan to appreciate its currency.
After markets closed on Wednesday, Taiwan reported the fastest pace of growth in a year in the first quarter, which might also be driving gains in local assets. Taiwan’s financial markets were closed on Thursday for a public holiday.
For Taiwanese stocks, strong US tech earnings are a significant driver, as Microsoft Corp and Meta Platforms Inc led Magnificent Seven stocks higher on Thursday.
“Microsoft and Meta’s capex came better than expected, suggesting that the AI [artificial intelligence] demand remains strong, which will benefit overall chip demand and Taiwan Semiconductor Manufacturing Co’s (台積電) revenue,” said Jeff Pu (蒲得宇), analyst at GF Holdings Hong Kong Corp (廣發控股).
He sees expectations for softness in the US economy to weigh on the greenback and benefit the NT dollar.
