Key Moments:

• The USD/TWD pair plummeted 5.88% on Monday, extending the New Taiwan Dollar’s two-day rally.
• Taiwan’s central bank denied any US request for a stronger Taiwan dollar.
• Lai Ching-te urged an end to misinformation regarding foreign exchange discussions.

Currency Spikes as Speculation Swirls Around Taiwan-US Trade Talks

A dramatic rally saw the New Taiwan Dollar appreciate 5.88% against the greenback on Monday, and the USD/TWD dropped below the 28.896 threshold. This marked another extension of the record-high upward momentum the TWD experienced over the weekend, which rippled through financial markets and stirred fresh concerns over dollar weakness in Asia.

Market participants attributed the surge to an unexpected rush to offload US dollars by investors, exporters, and insurers. Traders reported scarce interest in buying the greenback, leading to rapid appreciation of the Taiwan dollar. Despite this sharp movement, the precise catalyst for the rally remained unclear.

This uncertainty fueled persistent rumors suggesting the dollar’s decline stemmed from a covert agreement reached during recent US-Taiwan trade talks in Washington. However, the Taiwanese central bank and Office of Trade Negotiations firmly denied that exchange rate policy was on the agenda.

President Lai Ching-te addressed the speculation directly in a video message circulated on Monday, demanding that “malevolent people” cease their circulation of false claims. He also called on the public to “share the correct information” and remain confident in Taiwan’s economic performance. He emphasized that Taiwan’s trade imbalance with the US is driven by high demand for its tech exports, particularly semiconductors, and not by currency manipulation.

In addition, Central Bank Governor Yang Chin-long reiterated that Taiwan had pledged not to manipulate its currency. He continued, acknowledging recent central bank actions to maintain stability, and expressed hope that the recent exaggerated market speculation would end.

The sharp rise in the Taiwan dollar followed signs earlier in April that the currency was gaining strength, a trend that started when the US announced increased tariffs, including a now-canceled 32% import tax on goods originating from Taiwan. Some analysts believe those moves, combined with capital market dynamics unique to Taiwan, triggered a wave of US dollar selling among exporters and insurers looking to hedge currency exposures.

BNY Investment Institute’s Aninda Mitra suggested that the rally highlighted how an accumulation of less prominent financial instabilities could trigger sharp corrections when the fundamental political landscape experiences a major upheaval.