Latest news with #currencyAppreciation
Bloomberg
27-05-2025
- Business
- Bloomberg
Taiwan's Dollar Inches Close to May Peak as Greenback Retreats
The Taiwanese dollar is edging close to a peak set earlier this month, when it notched the biggest single day gain since the 1980s. The currency advanced past 30 per dollar this week and is less than 1% shy of reaching this month's strongest level. The latest bout of the currency's appreciation has been gradual, mostly driven by greenback weakness spurred by uncertainty over trade deals and US fiscal concern.
Bloomberg
21-05-2025
- Business
- Bloomberg
Taiwan's Central Bank Says It Let Currency Soar to Reset Market
Taiwan's central bank said it strategically let the local dollar rally earlier this month to let market expectations for gains play out, a move that allowed the currency to post its sharpest appreciation since the 1980s. 'It's a tactic, we can cool down the market expectations by doing this,' Deputy Central Bank Governor Yen Tsung-ta said in response to questions from lawmakers about whether the Taiwan dollar's rise was normal. 'We had used similar tactics before.'
Reuters
12-05-2025
- Business
- Reuters
Breakingviews - Taiwan insurers get a stern currency warning
HONG KONG, May 12 (Reuters Breakingviews) - The Taiwanese currency's recent stunning rally against the U.S. dollar has highlighted a big risk in an unlikely area: the island's insurers. The large swing against the greenback, if sustained, will hit earnings at Cathay Life and its peers, which between them hold some $760 billion of overseas investments, mostly of U.S. stock and bonds. Hedges and reserves will soften the blow. But the underlying mismatch of domestic policies funding overseas assets is an enduring problem. It is hard to pinpoint what prompted the Taiwan dollar's overall 6% appreciation, per LSEG, against its U.S. counterpart on May 2 and May 5. A combination of capital inflows and expectations that authorities will allow a stronger currency to smooth trade talks with Washington were probably factors, although the central bank has denied the latter. In any event, local exporters rushing to convert U.S. dollars and investors scrambling to hedge their currency exposure exacerbated the situation. As of Friday's close, the Taiwan dollar was trading at 30.29 to the dollar - a near-9% appreciation since the start of April. The island's insurers have put an estimated 70% of their $1 trillion, opens new tab or so of investable assets as of January overseas, but 80% of their liabilities – the life insurance policies they have written – are in the local currency. When they prepare their earnings results each quarter, they have to convert their foreign holdings into Taiwanese dollars. On paper, the recent ructions mean – absent a reversal – that their bottom lines are in for a pummelling. Cathay Life disclosed, opens new tab last year that a 1% of currency appreciation against the U.S. dollar would translate to a T$7.6 billion ($251 million) hit to its bottom line, after hedging. Theoretically, a 10% appreciation would have wiped out its full-year profit. The island's central bank supports local life insurers by funding a "decent chunk" of their hedging costs via FX swaps managed by local banks, according to Brad Setser, a Senior Fellow at the Council on Foreign Relations. That still leaves a significant portion of private market hedges exposed to global interest rates and price swings. All else being equal, a strengthening Taiwan dollar can quickly turn into a solvency nightmare: the local industry has a combined $86 billion in shareholders' equity, representing 11.3% of its overseas holding. Taiwanese lifers, though, have spent years managing currency fluctuations while remaining well capitalised. They have specific reserve funds that can offset up to 100% of foreign exchange losses; those reserves swelled on the back of a strong U.S dollar in 2024. They have also ramped up sales of foreign-denominated policies in recent years. All in, that means just 12% of total assets have none of those protections, per S&P Global analyst Serene Hsieh. That works out to $147 billion, using the latest government figures as of January - less than 18% of GDP. That's comforting from a systemic perspective. But it's no excuse for complacency. Income statements will still bleed red ink. And U.S. President Donald Trump's trade wars may yet cause further ructions that lead to long-term appreciation of the Taiwan dollar. Ultimately, so long as the export-dependent economy keeps running a massive account surplus - nearly 15% of GDP last year - life insurers will keep investing abroad. But now their balance sheet mismatch has been exposed, they will need to find new ways to mitigate it. Follow @mak_robyn, opens new tab on X CONTEXT NEWS Taiwan's Financial Supervisory Commission held meetings with three of the island's biggest insurers, Cathay Life, Fubon Life and Nanshan Life, local media reported on May 5. The three companies told the regulator that their risk-based capital ratios would remain within legal limits even if the Taiwan dollar strengthened below 30 per U.S. dollar, according to the report. The Taiwan dollar's 6% rise against the U.S. dollar over May 2 and May 5 marked a record two-day appreciation. On May 9, the currency closed at 30.29 to the U.S. dollar, per LSEG.
Zawya
09-05-2025
- Business
- Zawya
After currency turmoil, Taiwan's central bank warns banks to follow forex rules
Taiwan's central bank said on Friday that banks should follow foreign exchange settlement rules, after the Taiwan dollar notably strengthened last week and earlier this week. The Taiwan dollar on Monday and last Friday appreciated strongly against the greenback on market speculation that the U.S. had asked Taiwan to allow its currency to appreciate as part of tariff talks. Both the central bank and Taiwan President Lai Ching-te denied that the Taiwan dollar was part of talks with the United States, and the currency has since steadied. In a statement on its website, the central bank said that it urged banks to "fulfil their guidance duties" for their customers when it came to accepting foreign exchange settlements. When accepting large-value Taiwan dollar settlement transactions, banks should confirm that the relevant supporting documents are consistent with the "declared nature of the transaction", it added. For handling Taiwan dollar forward exchange transactions, banks should check the "reasonableness, relevance, and practicality of the transaction documents and financial flows at the time of contracting", the central bank said. It added that it had recently conducted on-site inspections at banks which revealed that some companies or individuals had remitted funds in the name of foreign loans for settlement in Taiwan dollars, but there was "no actual use of the funds in Taiwan dollars". It did not name the banks it had inspected. Taiwan's central bank has a mandate for the currency's stability, and generally does intervene as needed to ensure its movements either way are not excessive. (Reporting by Liang-sa Loh and Ben Blanchard. Editing by Mark Potter)
South China Morning Post
07-05-2025
- Business
- South China Morning Post
Taiwan currency's surge a ‘warning shot' for Asia's de-dollarisation: analysts
The New Taiwan dollar's recent surge, along with the appreciation of other Asian currencies, suggests a deepening of regional de-dollarisation as investors rethink their investments in the US currency amid Washington's 'extremely predatory' behaviour towards foreign countries, analysts said. Advertisement Economies like Taiwan, with a historically high exposure to assets denominated in US dollars, have taken a foreign exchange-led hit after the American currency weakened in recent weeks, wrote Francesco Pesole, foreign exchange strategist at Dutch bank ING, in a note on Tuesday. 'Local players are now seeking greater US dollar hedging, as well as starting to diversify away from US investments.' The shift from US assets is likely to contribute to the continued devaluation of US dollars, supporting a 'bearish narrative' for the currency, Pesole added. The New Taiwan dollar's surge hit a pause on Tuesday, closing at NT$30.28 to US$1 from Monday's NT$30.145 – ending a strengthening streak observed since April 24. It traded at NT$30.244 as of Wednesday afternoon. Advertisement Taiwan's central bank published a statement on Monday urging manufacturers to remain calm and avoid 'dumping US dollars due to irrational expectations based on over-exaggerated or untrue analyses in the market'.
