- In Taiwan's foreign exchange market, the US dollar against the New Taiwan dollar (USDTWD) depreciated by more than 0.1 on Wednesday under the dual pressure of a strong international dollar and a sharp decline in the local stock market. It fell below the 31.700 mark during the session and approached the 31.800 level, ultimately hitting a new intraday and closing low in over two months.
- Foreign and Chinese capital saw a massive net sell-off in the Taiwan stock market, reaching 177.419 billion New Taiwan dollars, setting a record for the highest single-day net sell-off in the history of the Taiwan Stock Exchange. The cumulative net sell-off over two consecutive trading days has exceeded 216 billion New Taiwan dollars, leading to a massive outflow of funds in the afternoon trading session.
- Despite exporters actively selling US dollars due to the depreciation of the Taiwan dollar in the afternoon, it was still difficult to resist the strong demand for foreign exchange purchases by foreign investors. The Central Bank of Taiwan intervened in the late trading session to adjust liquidity, thereby easing some of the depreciation pressure on the Taiwan dollar. The market expects the Taiwan dollar exchange rate to fluctuate between 31.700 and 31.900 in the short term.
Massive Foreign Sell-off Triggers Forex Market
Affected by the sharp decline in the Philadelphia Semiconductor Index in the previous trading day, Taiwan's Weighted Index closed down 2.24% on Wednesday, falling below the five-day moving average. The severe fluctuations in the stock market directly triggered risk aversion among foreign investors, with foreign and Chinese capital net selling 177.419 billion New Taiwan dollars in a single day, setting a new historical record.
Banking sources revealed that foreign capital outflows were moderate in the morning, but the demand for foreign exchange purchases by foreign investors suddenly intensified in the afternoon, rapidly expanding the scale of capital outflows. This phenomenon indicates that after the Taiwan stock market broke through key technical levels, programmatic trading and risk exposure adjustments by overseas institutional investors are accelerating.
Central Bank Regulation and Exporters' Forex Selling Game
As the Taiwan dollar's exchange rate against the US dollar accelerated its depreciation and tested the 31.800 mark, a clear liquidity game emerged within the market. On one hand, there was an extremely aggressive US dollar buying by foreign investors, while on the other hand, exporters triggered significant foreign exchange selling demand due to the exchange rate reaching a stage low, leading to an explosive increase in overall trading volume in the Taipei foreign exchange market.
Amidst the intense interplay of bullish and bearish forces, the Central Bank of Taiwan conducted routine stabilization operations in the late session, providing US dollar liquidity to ease the decline, demonstrating the regulators' intention to prevent irrational over-adjustment of the exchange rate.
Cross-Asset Impact and International Interest Rate Spillover
From a global macro perspective, the Taiwan dollar, previously supported by strong performance in Taiwan stocks, began to correct in the face of changes in the external environment. After the Federal Open Market Committee (FOMC) meeting, the Federal Reserve's (Fed) overall monetary policy direction showed marginal changes, with market expectations for rate hikes within the year heating up again, driving US Treasury yields and the US dollar index to strengthen.
In the overseas non-deliverable forward (NDF) market, the premium for the one-month US dollar against the New Taiwan dollar swap points slightly increased compared to the previous day's close, and the one-month forward quote also rose to the 31.872 to 31.888 range, reflecting the continued short-term pressure on the Taiwan dollar in the overseas derivatives market.
Market Outlook and Variable Analysis
Traders pointed out that the Taiwan dollar's previous relatively resilient performance mainly benefited from the prosperity of global tech stocks and the semiconductor industry. However, once the external liquidity environment tightens or the US tech sector faces valuation adjustments, the linkage risk between local stock and foreign exchange markets will significantly amplify.
In the coming trading days, the core observation point for the market remains whether the operations of foreign investors in Taiwan stocks have sustainability and whether the overall depreciation space for non-US currencies will be further opened. If the international US dollar index continues to hold above key resistance levels, the Taiwan dollar exchange rate may continue to seek support in the 31.900 or even deeper range.
