The Taiwan dollar (TWD) exchange rate has experienced significant volatility in recent months, appreciating beyond 29 TWD per USD by late June before depreciating back to 30 TWD by mid-August. Jiann-Chyuan Wang, Vice President of the Chung-Hua Institution for Economic Research (CIER), noted that inconsistent U.S. trade policies have weakened the U.S. dollar index. This, coupled with foreign investors re-entering the Taiwan stock market and repatriation of funds by the life insurance sector, has exerted strong upward pressure on the TWD. However, the Central Bank’s interventions have had limited impact, and robust market expectations have further amplified exchange rate fluctuations.
Inflows of foreign capital and currency sales by exporters have intensified the TWD’s appreciation. However, as the U.S. restocking surge subsides, export growth is expected to slow in the second half of the year. A potential decline in orders could reduce exporters’ demand for currency conversion, negatively affecting the Taiwan stock market and prompting foreign capital outflows, which may place renewed downward pressure on the TWD.
Vice President Wang cautioned that Taiwan’s life insurance industry, with its substantial assets and heavy reliance on overseas investments, faces increased hedging costs due to exchange rate volatility. The sharp fluctuations in the TWD have created dual pressures on both the export sector and financial markets. As an export-oriented economy, Taiwan must respond prudently to mitigate the impacts of a potential global economic downturn.
Author: CIER Editorial Team Date: September 12, 2025