Taiwan Dollar Expected to Fall Below NT$30 as U.S. Pressure Mounts

In a significant development for the Taiwan dollar, it's anticipated that the currency could soon drop below the NT$30 mark against the U.S. dollar. Chief economist Lin Chi-chao of Cathay United Bank highlighted the influence of U.S. pressure on Taiwan to allow its dollar to strengthen. Recent trading has shown a marked decline in the value of the U.S. dollar, which fell sharply by NT$0.953 to close at NT$31.064 on Friday, marking its lowest level since January 9, 2024. This decline of 3.07% represents the steepest single-session drop for the U.S. dollar since 2002. The Taiwan dollar's remarkable performance placed it as the strongest currency in the Asian market on that particular day, bolstered by significant foreign institutional buying on the Taiex, Taiwan's benchmark stock index, which surged by 552.61 points. An expectation that the U.S. Federal Reserve might cut rates by up to 100 basis points this year also contributed to the strength of the Taiwan dollar. Lin specified that anticipated pressures from the U.S. are causing local traders to be wary as they aim to curb their considerable trade surpluses with Washington ahead of upcoming tariff negotiations. Lin's analysis suggests similarities to the Plaza Accord of 1985, which facilitated U.S. interventions to devalue the dollar. Currently, traders are expressing concerns that these negotiations may usher in what some are calling a 'Plaza Accord 2.0'. Despite these apprehensions, Lin believes that traders might be overreacting, indicating that while the U.S. dollar may indeed drop below NT$30 soon, the Taiwan dollar's trajectory likely aligns with other Asian currencies in the long term. Importantly, the central bank of Taiwan clarified that it has yet to receive any formal request from the U.S. Treasury regarding actions to strengthen the Taiwan dollar, seeking to quell speculation amid the ongoing fluctuations. Other economists echoed similar sentiments, noting that the recent rise of the Taiwan dollar is reflective of broader trends in the Asian market, particularly in reference to its historical relationship with the Japanese yen. This situation underlines the delicate balance of currency management amid global economic pressures, and the actions taken in response to the U.S. demands will likely have far-reaching implications for Taiwan's financial landscape and its trade relationships going forward.