(Bloomberg) — The Taiwan dollar’s strongest monthly rise in over a year is running into a wall of headwinds, sowing doubts among analysts on the sustainability of its rebound.
A drop in foreign equity inflows, a forwards market implying underlying demand has softened and some technical resistance levels have led some analysts to rethink the prospect of further gains. That is testing an August advance that had set the currency on course for its best month since May 2025, following its worst July in 11 years.
“Foreign equity inflow impulse has faded after the mid-Aug buying,” said Christopher Wong, a strategist at Oversea-Chinese Banking Corp. in Singapore. He said the forwards market has not widened materially, suggesting local exporters aren’t betting on a Taiwan dollar rally.
Wong added that while 31.80 serves as near-term support for the currency pair, a more decisive drop would require a broader weakness in the dollar, alongside renewed foreign capital inflows and stronger dollar-conversion activity by exporters.
Much of the Taiwan dollar’s rally in August came as outflows from dividend repatriation dwindled, bringing investor focus back to the island’s robust economic fundamentals driven by the tech sector. The currency closed at 31.848 per US dollar on Friday.
The government lifted its annual growth forecast to above 10%, on track for the economy’s first double‑digit expansion since 2010. Taiwan’s industrial production data due Tuesday will be closely watched by investors for further clues on the growth momentum.
However, even as net inflows recovered from a slump in July, analysts are warning that the local currency lacks the fresh capital flow for it to return to pre selloff levels. Inflows slowed to around $861 million last week from $6.5 billion in the prior week.
“Dollar-Taiwan dollar has been tracking equity flows nicely throughout this year, until the recent moves,” said Khoon Goh, head of Asia research at Australia & New Zealand Banking Group.
“Part of the move could be pullback after the July dividend repatriation flows were done,” he said, adding that “unless there is ongoing large equity inflows, it looks like further downside in dollar-Taiwan dollar should be limited.”
The move in the actively traded one‑week non-deliverable forward points also underscores fading optimism for the Taiwan dollar. After spending much of early August in negative territory, the points have drifted back toward neutral levels since mid‑August, signaling reduced confidence in the currency’s ability to sustain further gains.
“31.77 is a key support level though and we may see more two-way action, especially if the dollar starts to make a more meaningful rebound,” said Fiona Lim, senior FX strategist at Malayan Banking Berhad.
Lim said that she doesn’t rule out forward points shifting back into positive terrain — a move that would price in Taiwan dollar weakness — should hedging demand rise or the dollar rebound.
This week’s main economic events:
–With assistance from David Finnerty and Kaman Ng.
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