Taiwan Dollar Stabilises vs Dollar After Historic 10% Gains

May 8, 2025 - Written by Frank Davies

STORY LINK Taiwan Dollar Stabilises vs Dollar After Historic 10% Gains

After a dramatic surge of 10% on Friday and Monday, the Taiwan central bank has managed to stabilise the Taiwan dollar.

There are still important underlying tensions surrounding Taiwan and other Asian currencies which will have important global consequences while 1-month volatility remains at historic highs.

The Dollar to Taiwan Dollar (USD/TWD) exchange rate is trading around 30.25 from lows around 29.00 early in the week, but still substantially below levels above 32.0 seen last week.

Evidence of regional capital flows as well as trade talks will continue to be monitored very closely.

Sustained Asian selling of Treasuries would be very likely to weaken the US dollar, especially given the US current account deficit.

The central bank stated that the currency was being driven by over-strong market expectations and urged players not to engage in speculation.

The President also denied that currency gains were linked to trade talks with the US.


A firmer US dollar in global markets has also helped stabilise the situation.

Credit Agricole considers the currency has strengthened too far, but has lowered its end-2025 USD/TWD forecast to 31.4 from 32.8 previously.

SocGen noted the potential for long-term gains, but on a short-term view added; “We do not recommend chasing USD/TWD to the downside below the 30.0 level.”

ING commented; “Clearly there’s a lot of pressure on the Central Bank of the Republic of China (CBC) given the recent volatility. The takeaway is that the CBC will likely continue efforts to prevent speculation from causing high volatility, but it also is not the sole decider of the currency trajectory given market forces.”

Deutsche Bank’s George Saravelos commented on the “Taiwan effect” and evidence of heavy selling by US bond funds by Taiwan players; “In all, we agree with the view expressed in the market that the extremely volatile markets seen in Taiwan FX over the last few days are a warning shot to the self-fulfilling moves that could happen to other currencies where the institutional investor industry is left with a large overhang of unhedged USD asset positions. The JPY immediately comes to mind.”

According to JP Morgan; “There is little in official rhetoric to indicate that FX policy is in active play as part of Asian trade talks with the US. Yet anecdotal conversations indicate a ‘there is no smoke without fire’ mindset among investors.”

Hedging actions by Taiwan life insurers remains a key focus. Insurers are estimated to hold around $770bn in overseas assets, much of this in US bonds.


A high proportion of these holdings are also unhedged due to previous weakness in Asian currencies.

Dollar vulnerability, however, has changed the equation and a further slide would increase unrealised losses.

There will, therefore, be pressure for increased hedging ratios which would increase Taiwan dollar buying or for US bonds to be sold which would destabilise the US Treasury market.

According to SocGen; “For the life insurance industry, broadly speaking, we think the risk is one of profitability rather than one of solvency.”

ING added; “If we do see a weaker dollar environment persist, further strengthening of the Taiwan dollar can’t be ruled out.”

Markets will be waiting for the US Treasury semi-annual currency report which is due in May or June and the risk that Asian currencies, including Taiwan will be labelled as currency manipulators.

CBC Governor Yang Chin-long commented; “I am confident that Taiwan will not be labelled as a currency manipulator. The island’s foreign-exchange interventions didn’t exceed the 2% of gross domestic product criteria set by the US.”

If Taiwan is named as a manipulator, there will be further ructions and buying pressure on the currency.

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