- The New Taiwan Dollar reversed its early losses against the US Dollar on Friday, marking a second consecutive day of gains. This was mainly supported by foreign investors' shift to two-way operations in the afternoon and exporters actively selling foreign exchange before the close, with timely intervention by Taiwan's central bank.
- Taiwan's stock market rebounded on Friday, closing up 2.4%. Foreign investors turned net buyers in the Taiwan stock market with a net purchase of 28.69 billion New Taiwan Dollars, successfully halting the previous six-day streak of net selling totaling over 473.2 billion New Taiwan Dollars, providing liquidity support to the foreign exchange market.
- The market's focus is on next week's "Super Central Bank Week." Both the Federal Reserve and Taiwan's central bank will hold interest rate meetings, and the flow of foreign capital and operational strategies will be key variables determining the future trend of the New Taiwan Dollar.
Stock and Currency Interaction Guides Exchange Rate Reversal
After experiencing early morning volatility and weakness, the New Taiwan Dollar showed resilience against the US Dollar on Friday afternoon. Currency experts noted that foreign investors maintained a net outflow stance in the morning, putting pressure on the New Taiwan Dollar. However, as Taiwan's stock market fluctuated upwards and ultimately held onto a gain of over 2%, foreign investors' strategies shifted to a balanced two-way approach in the afternoon. Near the close, many exporters seized the opportunity to actively sell US Dollars, coupled with Taiwan's central bank intervening at key points, resulting in a second consecutive day of slight appreciation for the New Taiwan Dollar, effectively avoiding a divergence between the stock and currency markets.
Improvement in Foreign Capital Dynamics
From the perspective of stock market capital flows, foreign and mainland Chinese investors in Taiwan's stock market reached a turning point, becoming net buyers with a net purchase of 28.69 billion New Taiwan Dollars on the day. This move successfully ended the previous six-day streak of massive net selling amounting to 473.255 billion New Taiwan Dollars. Although Taiwan's stock market recorded a significant 2.4% rebound on Friday, it still closed the week down 2% due to previous selling pressure. In the offshore non-deliverable forward foreign exchange market, the discount on the one-month US Dollar to New Taiwan Dollar swap points remained stable compared to the previous trading day, with one-month forward quotes staying in the 31.583 to 31.603 range, indicating relatively stable market forward expectations.
Interplay of External Macro Policies and Geopolitical Variables
The global foreign exchange market remains constrained by multiple macro factors. The European Central Bank announced its first interest rate hike in three years on Thursday, providing marginal policy support to the Euro, keeping it near a one-week high. Meanwhile, the international US Dollar showed strength during the Asian trading session, recovering some of the previous day's losses. This was mainly due to traders' skepticism about reports of a potential ceasefire agreement in the Middle East, with geopolitical uncertainties providing temporary defensive support for the US Dollar. Substantial progress in US-Iran talks will remain a focal point for the market over the weekend.
Approaching Central Bank Week Sparks Market Caution
Looking ahead to next week, the global financial market will enter a period of intensive central bank policy pricing. Both the Federal Reserve and Taiwan's central bank will hold their second-quarter interest rate meetings. The prevailing market expectation is that both will likely maintain their current interest rate policies. Traders noted that short-term capital flows will heavily depend on foreign investors' allocation directions in the equity market. If Federal Reserve Chairman Walsh delivers policy signals beyond expectations, the international US Dollar trend may be repriced. Traders estimate that the New Taiwan Dollar will fluctuate in the 31.550 to 31.700 range against the US Dollar in the short term, with strong price support expected at the 31.800 level due to exporters' strong willingness to sell foreign exchange and potential central bank defense.
