Taiwan Dollar: Flow-driven weakness with policy support – OCBC

FXStreet Insights Team FXStreet

OCBC Bank’s Sim Moh Siong and Christopher Wong note that Taiwan Dollar (TWD) remains on the back foot, with USD/TWD above 32, driven mainly by foreign equity selling and dividend/remittance-related US Dollar (USD) demand rather than weaker fundamentals. Authorities are encouraging quicker execution of large USD sell orders to mobilise natural supply, while exporter USD selling and CBC guidance may reduce the risk of a disorderly move higher in USD/TWD.

Vulnerable on flows but disorderly spike risk tempered

"TWD has stayed on the back foot, with USD/TWD breaking above the 32 handle. The move looks largely flow-driven rather than a deterioration in domestic fundamentals. Foreign equity selling has weighed on Taiwan equities and added to USD demand, while dividend/profit remittance flows also added to seasonality demand for USD."

"CBC officials have framed recent FX weakness as largely USD-led but also pointed to portfolio flows and elevated Taiwan equity valuations as factors weighing on TWD. Elsewhere, there were reports saying that the CBC had asked local banks receiving large USD sell orders to complete the transactions on the same day, rather than delaying or staggering execution."

"This suggests the authorities are hoping to bring forward more natural USD supply to help tame TWD depreciation pressure."

"Bullish momentum on daily chart intact while RSI rose into overbought conditions. Upside risks persist but not ruling out the risk of snapback. Resistance at 32.22 (76.4% fibo retracement of 2025 high to low), 32.50/60 levels. Support at 31.95, 31.76 (21 DMA)."

"Near term, TWD may remain vulnerable if foreign equity outflows persist and USD sentiment stays firm into the FOMC minutes. But the presence of exporter/USD-selling supply, alongside CBC guidance to smooth execution, may partially help to reduce the risk of a disorderly move higher in USD/TWD."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

Author

FXStreet Insights Team

FXStreet

The FXStreet Insights Team is a group of journalists that handpicks selected market observations published by renowned experts. The content includes notes by commercial as well as additional insights by internal and external analysts.

AUD/USD remains depressed 0.7000, awaits FOMC Minutes

AUD/USD struggles to capitalize on its recent recovery move and trades with a negative bias below 0.7000 in Wednesday's Asian session. Amid geopolitical uncertainty, the US Dollar attracts some dip-buyers after a fresh leg up in US bond yields, keeping the pair under pressure despite hawkish RBA expectations. All eyes now remain on the FOMC Minutes.

USD/JPY holds firm near 158.50 ahead of Fed Minutes

USD/JPY hangs close to a one-and-a-half-week high near 158.50 in the Asian session on Wednesday, with bulls now awaiting a move beyond the 200-day SMA hurdle before positioning for further gains ahead of the FOMC Minutes. Meanwhile, a fresh leg up in US bond yields revives US Dollar demand amid geopolitical uncertainties, boosting the pair amid dovish BoJ commentary.

Gold remains depressed; eyes two-month low ahead of FOMC Minutes

Gold maintains its offered tone through the Asian session on Wednesday, trading within striking distance of a two-month trough, around the $4,100 neighborhood touched the previous day. Resurgent US Dollar demand is seen as a key factor exerting pressure on the commodity as traders now look forward to the FOMC meeting minutes for a fresh impetus.

Dogecoin extended correction and weakening momentum raise downside risks

Dogecoin extends its losses, trading around $0.090 down more than 5% so far this week. Bearish pressure is strengthening, with short positions reaching a one-month high and traders in overheated conditions. Meanwhile, weakening momentum indicators are also hinting at further losses in DOGE. Derivatives data shows cautious signals among traders.

USD/INR remains broadly muted after RBI’s 25 bps hike in Repo Rates to 5.5%

The Indian Rupee remains broadly muted at around 96.37 against the US Dollar after the Reserve Bank of India’s monetary policy decision. In the policy meeting, the RBI decide to hike its Repo Rate by 25 basis points to 5.5%, the first hike since February 2023.

Eurozone inflation just hit 3.8%, its highest in three years. This chart shows why the ECB can’t simply hike its way out

The ECB would normally have a relatively straightforward answer to inflation running almost twice its target: raise interest rates. But these are not normal circumstances. This time, the bond market is already doing part of the tightening for it, leaving the ECB facing an increasingly difficult dilemma.