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USD/TWD Steadies at two-Year High

USD/TWD Steadies at two-Year High

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USD/TWD remains close to its highest point since 2022 as tensions with China continue to weigh heavily on the Taiwan dollar.

The Taiwan dollar is expected to trade weaker against the buck in the coming weeks because of the total breakdown of relations with China.

At the time of writing the US dollar to Taiwan dollar exchange rate is 30.01, unchanged from yesterday’s closing price, and just 0.45% below last week’s high.

Nancy Pelosi’s impromptu trip to Taiwan last week has increased geopolitical tension in the region. The visit took place in spite of warnings from China, which views Taiwan as a part of its territory. The United States maintains unofficial ties with Taiwan despite recognizing Beijing as the only legitimate government in China. As a result, the Chinese Liberation Army (PLA) is currently conducting live fire war games around Taiwan in retaliation.

Taiwan’s Trading Partners

Both the US and China send money to Taiwan for high-tech equipment like semiconductors. Although Taiwan’s economic ties with mainland China and Hong Kong have grown to the point where the region is now by far the island’s largest trading partner.

According to official Taiwan data, mainland China and Hong Kong accounted for 42% of Taiwan’s exports last year, while the United States accounted for 15%.

USD Dollar to Taiwan Dollar Outlook

The daily price chart shows USD/TWD has been trending higher all year. The pair reached a two-year high of 30.30 last week, extending the dollar’s gains to 10% in 2022.

Notably, the exchange rate is above the major moving averages. The 50 Day Moving Average (DMA) at 29.76 (green line) provides the immediate support.

Furthermore, despite the bullish momentum, the Relative Strength Index (RSI) is not overstretched. At 59.13, the RSI indicates the rally has more room to run. With that in mind, USD/TWD could see more gains in the weeks ahead.

If the US dollar strength persists, the December 2019 high at 30.56 is an achievable target. However, a close below the 50-DMA should encourage Taiwan dollar strength.

USD/TWD Price Chart

Elliot Laybourne
Elliott is a former investment banker with a 20 year career in the city of London. During this time he held senior roles at ABN Amro, Societe Generale, Marex Financial and Natixis bank, specialising in commodity derivatives and options market-making. During this time, Elliott’s client list included Goldman Sachs, JP Morgan, Credit Suisse, Schroders Asset Management, and the Pennsylvania State Public School Employees Retirement System, amongst others. Today, he splits his time between Thailand and Dubai, from where he provides trading consultancy and business development services for family office and brokerage clientele.