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USD/TWD: Taiwan Dollar Falls Against the Buck

USD/TWD: Taiwan Dollar Falls Against the Buck

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The USD/TWD trading pair powered its way to a fresh two-year high this week as a resurgent US dollar pummeled Asian peers.

The US dollar to Taiwan dollar exchange rate hit 31.17 on Wednesday, the highest level since October 2019.

A perfect storm of competing factors has weighed heavily on TWD this year. First, escalating tensions with neighbor China is clouding the economic outlook, as is the worrying slowdown in the Chinese economy. Mainland China and Hong Kong are Taiwan’s largest trading partners, accounting for roughly 42% of the country’s exports in 2021. As such, traders are paying close attention to China’s progress for clues on the Taiwan dollar’s fate.

Another factor driving USD/TWD higher is the strong US Dollar. The greenback has appreciated considerably this year, with the Dollar Index touching a twenty-year high earlier this month. As a result, the Taiwan dollar has depreciated close to 13% against the US dollar year-to-date. Furthermore, the signs point to more weakness in the immediate future.

Economic Data September 15

A busy data calendar today starts with the US Retail Sales figure for August, excepted to improve by 1.0% from the previous month.

Next comes the initial jobless claims, forecast at 226k, up from 222k in July. Finally, the Philadelphia Fed Manufacturing report is expected at 2.8, down from 6.2 in August.

US Dollar to Taiwan Dollar Exchange Rate Forecast

The weekly chart shows the Taiwan dollar is weakening sharply against the buck. Notably, USD/TWD’s rally accelerated after clearing the former resistance at 30.56 (2020 high). As a result, an extension towards the the 2019 high at 31.37 appears likely.

The outlook remains positive as long as USD/TWD is above 30.56. However, a weekly close below this level invalidates the bullish view. In this event, we expect the Taiwan dollar to appreciate further, with the psychological 30.00 level as a potential downside target.

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USD/TWD Price Chart

USD/TWD Taiwan Dollar
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.