Taiwan Dollar: Trade boom contrasts FX stability – ING

ING’s Lynn Song emphasizes Taiwan’s remarkable trade performance, with September’s surplus reaching US$23.6bn, marking a 60.9% year-on-year surge in exports. This boom was primarily driven by tech-related machinery and electrical equipment. Despite strong exports, equities, and foreign inflows, the Taiwan Dollar has displayed relative stability, attributed to corporate investment, capital outflows due to yield differentials, and Taiwan’s central bank’s FX stability measures.

The robust trade surplus and Taiwan’s equity market, which attracted significant foreign inflows, have not resulted in a stronger Taiwan Dollar, likely due to two main factors: Taiwanese corporations seeking to expand production capacity through outward investment, and capital outflows resulting from the substantial yield spread between Taiwan and developed markets like the US.

Taiwan’s Central Bank of China has also implemented measures to ensure FX stability. With September’s inflation hitting 2.7% year-on-year and record trade data indicating ongoing growth, the Central Bank may consider raising interest rates at its December meeting. Taiwan continues to reap the benefits of higher global tech prices, with exports rising 25.8% year-on-year in September.