US currency and stock market gains surge due to optimism about US-China talks.
Rewritten Article:
- Bloomberg
In a surprising turn of events, the New Taiwan dollar surged and Taiwanese stocks soared on hopes of easing trade tensions between world economic powerhouses and the positive impact of US tech earnings on the nation's tech exports. The NT dollar saw an impressive gain of up to 3.8 percent against the US dollar, closing at NT$31.064, marking its biggest intraday surge since 2011. Meanwhile, the benchmark TAIEX jumped 2.73 percent, outshining regional equity gauges.
China's tentative openness to potential trade talks with the US helped lift the local currency and shares, boosting optimism about global trade. As the NT dollar strengthened, exporters hurried to exchange their US dollars for the local currency, while typical greenback buyers held back, resulting in a self-reinforcing feedback loop. Traders, however, stated there was no overt or unusual intervention by the central bank, which typically steps in to tame currency market volatility.
Christopher Wong, an Oversea-Chinese Banking Corp foreign exchange strategist, commented, "The sudden momentum of Taiwan dollar appreciation caught many market participants off guard, leading to a scramble to convert US dollars into local currency. The recent Taiwan dollar gains have also been fueled by hopes of dialogue between the US and China."
In 2021, the NT dollar reached the pinnacle of emerging Asian currency rankings, with a nearly 6 percent advance against the greenback. Other Asian currencies also saw gains amid optimistic trade sentiment, with the South Korean won and the Indonesian rupiah surging more than 1 percent the previous day.
The surge in the NT dollar is backed by massive volumes in greenback-NT dollar non-deliverable forwards, which are making a rare appearance at the top of global trading charts. Despite speculation about the US Department of the Treasury urging the appreciation of Taiwan's currency, the central bank has not received any such request.
Reports suggesting Washington had applied pressure on Taiwan to allow its currency to strengthen, citing the so-called "Mar-a-Lago Accord," were dismissed by the central bank in a Thursday statement. The central bank clarified that it faced no such external pressure to manipulate the NT dollar's value.
Meanwhile, Taiwanese stocks received a significant push from strong US tech earnings. Microsoft Corp and Meta Platforms Inc led the way in the "Magnificent Seven" stocks, climbing higher on Thursday. Jeff Pu, an analyst with GF Holdings Hong Kong Corp, stated, "Microsoft and Meta's capital expenditure exceeded expectations, signaling that demand for AI remains robust. This, in turn, benefits overall chip demand and Taiwan Semiconductor Manufacturing Co's revenue."
Pu added, "Perceptions of softness in the US economy could weaken the greenback, potentially bolstering the NT dollar."
- The surge in the NT dollar and the subsequent rise in Taiwanese stocks can be attributed to the positive impact of US tech earnings on the nation's tech exports and the easing trade tensions between world economic powerhouses, which includes finance and business sectors.
- The strength of the NT dollar in 2021, which saw nearly a 6 percent advance against the US dollar, has been observed in other Asian currencies as well, indicating a positive trend in the industry and the economy at large.
