Taiwan Dollar: Tech outflows and rising inflation weigh on TWD – Commerzbank

Commerzbank notes that USD/TWD has risen for five consecutive sessions to 31.68, driven by foreign equity outflows as global tech stocks correct. Taiwan’s exports and imports are surging on AI-related demand, while CPI has moved above the central bank’s 2% target. Even so, the CBC is expected to keep its policy rate unchanged at 2% at the upcoming meeting.

Equity outflows and CPI lift USD/TWD

"May exports jumped 51.7% yoy (Bloomberg consensus: 41.2%) vs 39.0% in April, marking the fifteenth consecutive month of double-digit growth. Integrated circuit exports surged 58.3% vs 40.5% in April, supported by robust demand for leading-edge chips used in AI-model training and token generation."

"Imports also surprised to the upside, rising 54.9% yoy (Bloomberg consensus: 40.3%) vs 29.2% in April. This was driven by firm investment momentum as capital goods imports rose 54.7% vs 33.3% in April. The May trade surplus widened to USD17.9bn (Bloomberg consensus: USD17.5bn) vs USD14.4bn in April."

"Looking ahead, inflation is expected to climb further. Headline inflation averaged 1.5% in the first five months of the year and the government is projecting 1.9% for this year."

"May CPI was slightly higher than expected at 2.2% yoy (Bloomberg consensus: 2.1%) vs 1.7% in April. It climbed above the Central Bank of the Republic of China’s (CBC) 2% inflation target for the first time since March 2025."

"In FX, USD/TWD rose 0.1% to 31.68 yesterday, rising for the fifth consecutive session driven by foreign equity outflow. On a net basis, foreign investors had sold USD8.8bn of equity in the first three days of the week. The TAIEX is down 4.1% so far this week due to a global tech sell-off. Year-to-date, TWD is down 0.8% vs the USD compared to the average for Asian currencies ex-Japan of 2.8%."

"On monetary policy, the CBC is expected to keep the policy rate unchanged at 2% at the next meeting on 18 June. Despite the recent pickup in inflation, policymakers have signaled comfort with the current monetary policy stance. CBC Governor Yang Chin-long noted that headline CPI remains relatively stable and that a momentary breach of the 2% target does not necessarily warrant a rate hike."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)