Taiwan’s central bank is bracing for further currency volatility as foreign stock market outflows accelerate and global trade tensions escalate, particularly with the prospect of renewed U.S. policies under Donald Trump.
In 2024, the central bank sold a record $16.4 billion in the foreign exchange market to support the Taiwan dollar, marking its third consecutive year of intervention and the largest intervention since at least 2018. Governor Yang Chin-long is set to present these findings to lawmakers on Thursday.
Foreign Outflows Weigh on Taiwan’s Markets
The Taiwan dollar fell more than 6% against the U.S. dollar in 2024, extending a three-year losing streak. So far in 2025, it has already declined another 0.5%, largely driven by a historic selling spree by foreign investors in Taiwan Semiconductor Manufacturing Co. (TSMC), the country’s most influential stock.
Foreign investors have significantly increased their influence in Taiwan’s equity markets due to the surging demand for AI-related chips. The value of local stocks held by global funds rose to 142% of Taiwan’s foreign reserves by February 2025, compared to just 69% in 2016, according to the central bank’s report.
Despite this expansion, overseas investors have offloaded Taiwanese equities for 12 straight sessions, selling a net NT$391 billion ($11.9 billion), on top of the $19.5 billion in net sales recorded last year.
Inflation Concerns and Economic Outlook
Taiwan’s inflation rate is projected to remain around 2% in 2025, though the central bank has warned it may revise its forecast upward if rising electricity prices and railway fares push costs higher.
With ongoing capital outflows, currency weakness, and uncertainty surrounding U.S. trade policy, Taiwan’s financial markets are expected to remain under pressure in the near term.
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