Breaking news! The TWD skyrockets nearly 7%, the Central Bank remains motionless, what calculations are hidden behind Bloomberg's analysis?

In the past two trading days, the New Taiwan Dollar has appreciated significantly against the US Dollar by nearly 7%, with the latest single-day increase reaching 2.5%, shocking the forex market. However, amidst such severe fluctuations, the Central Bank of Taiwan has chosen to remain inactive and has not taken any significant intervention actions. Is there a complex interplay of geopolitical and international trade factors behind this? International media Bloomberg has offered its analysis:

Forex Shockwave: New Taiwan Dollar Soars to Two-Year Largest Pump

According to a report by Bloomberg, the New Taiwan Dollar surged nearly 7% within two days, marking the largest weekly increase in two years, with a daily increase reaching 2.5%. This surge caught the market off guard and raised questions about why Taiwan's Central Bank did not intervene in a timely manner. In the past, when faced with such fluctuations in the Exchange Rate, Taiwan's Central Bank would usually step in to stabilize it, but this time it remained unusually silent.

U.S. factors emerge: Is the exchange rate becoming a potential negotiating chip?

Market analysis indicates that Taiwan and the United States are negotiating a bilateral trade agreement, and the appreciation of the New Taiwan Dollar may be related to this. Taiwan has maintained a large trade surplus with the United States for a long time, particularly in the semiconductor sector, where TSMC has made significant contributions. There are viewpoints suggesting that the United States may be questioning Taiwan's "weak currency policy," viewing it as a form of non-tariff trade barrier. If this is the case, the Taiwan Central Bank's decision not to intervene in the appreciation may be to reduce friction during negotiations.

Appreciation is a double-edged sword: consumers are happy, but exporters are suffering.

The appreciation of the New Taiwan Dollar is beneficial for imported goods. For example, the cost of the tapioca pearls imported from China, which Taiwanese people love to drink in bubble tea, will decrease, and consumers can expect cheaper beverages. However, for export-oriented industries such as semiconductors, it is a different story. TSMC pointed out last week that for every 1 percentage point appreciation of the New Taiwan Dollar, the operating profit margin will be compressed by nearly 0.5 percentage points. With the current appreciation of 7%, TSMC's profits are likely to face significant impact, posing a major challenge for the overall export industry.

Exchange Rate Fluctuation Sweeps Asia, Funds Are Accelerating to Flow Back Locally

Bloomberg Asia market executive editor Paul Dobson pointed out that this wave of Exchange Rate Fluctuation is not limited to Taiwan. Exporters in many Asian countries are facing pressure from a weakening dollar, leading to a large amount of capital flowing back from dollar accounts to their home countries to avoid forex losses. The Malaysian ringgit has also appreciated significantly recently, showing a similar trend to the TWD. Chinese exporters have also begun to change their strategy after many years, shifting from holding dollar assets to their local currency, further exacerbating the regional currency appreciation pressure.

Is Hong Kong unable to hold on? The monetary authority intervenes at record levels.

Aside from Taiwan, the Hong Kong Monetary Authority made record purchases of US dollars over the weekend to maintain the peg between the Hong Kong dollar and the US dollar. This highlights that the entire Asia is undergoing a wave of currency revaluation, especially against the backdrop of the US dollar possibly entering a long-term depreciation trend, where the intervention strategies of various central banks are under close scrutiny.

Will falling oil prices benefit the Asian economy? The impact varies by country.

At the same time, the decline in international oil prices has had varying degrees of impact on Asian countries. For energy-importing countries like Taiwan, the drop in oil prices combined with a strong currency will enhance purchasing power and help lower import costs. However, for oil-producing countries like Malaysia, they may simultaneously face the dual impact of falling oil prices and the appreciation of their local currency, which could harm export revenues.

Is the atmosphere of US-China trade warming up? The Asian market is watching the changes.

Despite the current fluctuations in the Asian market being closely related to the appreciation of the exchange rate, the market is also closely watching the latest developments in U.S.-China relations. Paul Dobson pointed out that Washington has released friendly signals regarding resuming negotiations with China, which has led Asian investors to maintain a cautiously optimistic attitude. If both sides can ease trade tensions, it will be a significant advantage for the Asian market. However, during the early trading hours in Asia, where market liquidity is low, any statements or policy changes from the U.S. side may be amplified, leading to severe short-term market fluctuations.

This article has shocked foreign media! The New Taiwan Dollar surged nearly 7%, while the Central Bank remains inactive. What calculations are hidden behind Bloomberg's analysis? Originally appeared in Chain News ABMedia.