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With the rest of FT Alphaville today, this will now be officially a Taiwanese dollar blog. Fortunately for content reasons, and as we expected last week, our favorite Asian currency is having another special day.
At one time today, Taiwan’s dollar had fired more than 5 percent against the dollar, crossing the 30 TWD per USD brand for the first time since the summer of 2022. It has now increased another 3.5 percent, extending what has been a rather epic rally.
Trade has been “agitated” according to Bloomberg. Alphaville’s emphasis below:
Taipei’s volume of US dollar dollars rose to most early Monday from the 2008 world financial crisis. Banks have been bombarded with customer consultations about the increase, with Cathay United Bank Co. Introduction of virtual tails in their online application to “maintain system stability.”
Despite the currency’s profits, Taiwan’s monetary authority has not been actively intervening in the market on Monday to limit its strength, although it usually does so to soften volatility.
“Local exporters are panic, And local lives are insufficient, While capital -related outputs have ceased, “said Ju Wang, chief of greatest foreign exchange in China and rates at BNP Paribas SA in Hong Kong.” The Central Bank is still the only buyer, but has not been aggressively supporting the market, feeding the speculation that the valuation of the currency is part of the commercial conversations. “
That last bit in bold is the crucial driver, in FTAV’s opinion. As Brad Setser and Josh Younger wrote here earlier this year, the Taiwanese life insurance industry has become huge in the last decade and has placed much of their assets in the American bonds. But to maintain the returns, they only partially covered their FX FX exhibitions, in practice betting on their solvency on the TWD that remains weak against the USD.
That bet was. . . reckless, as we can see now.
The Twd’s appreciation caused by the tariff shock of April 2 has been transformed into a wild demonstration, almost disorderly by Taiwanese lives, lately delaying to recover or cover their exhibitions in US dollars. As an analyst told Bloomberg:
. . . “The movements in the last two sessions were not preceded, and if you are exposed to the dollar as a life with little or no coverage, it had been a painful trip,” says Mingze Wu, a currency merchant in Stonex in Singapore. “Taiwan’s life insurers are among the largest headlines of American ties in Asia, so they make sense that they are alert at this time.”
Quite! The actions of Cathay Financial Holding and Fubon Financial Holding, the parents of two of the largest Taiwanese lives, fell 6.8 percent and 5.9 percent respectively today.
Bloomberg reports that the local market regulator has asked today the largest insurers in the country “how the rapid strengthening of the Taiwan dollar has impacted its operations.” And in case the language speaks, the Taiwanese Central Bank has just held a press conference on the TWD.
We have not yet found any transcription translated or holders, but it seems that investors were not exactly sure that the Central Bank will intervene to control or reverse the rally.
The spot market is now closed, but the unrepresents of one month have recovered recently. Here is a table that shows the exchange rate that reaches 28,695, but since then we have reached 28,282. 🍿🍿🍿
Additional reading:
– How Taiwan became a quiet superpower of the bond market (FTAV)
– What does Taiwan have to do with the mortgage rates of the United States? (FTAV)
– Why Taiwan represents a threat to the United States bond market (FT)
