USD/TWD to trend lower towards 27.60 by year-end – MUFG

The TWD delivered a 0.86% depreciation against the US dollar in June. Strategists at MUFG Bank expect the Taiwan dollar to remain resilient and likely to strengthen in the second half of the year.

Exports to remain supportive

“We still think Taiwan will benefit from its competitiveness in the semiconductor sector and will likely continue to have a strong trade balance.”

“There are negative views of the TWD by focusing on the net portfolio investment outflow, due to domestic residents’ investment into foreign bonds and stocks and also foreign investors’ withdrew from Taiwan’s stock markets. But, the strong trade balance is likely to out-weigh the size of often-observed foreign investors’ net investment in Taiwan stock market, for example.” 

“Starting from July 1st, Taiwan’s new amendments to the foreign exchange receipts and transaction declaration measures will be in effect. Although no change in the calculation methods and the quotas, the bank did mention that it will adjust the annual accumulative purchase or sales amount, depending on economic condition and the need of maintaining the order of the foreign exchange markets.” 

“Balancing this new policy development and recent development of TWD, as well as a weaker USD in H2, we expect USD/TWD to decline to 27.750 in Q3, 27.600 in Q4, and a mild appreciation in the first half of 2022 when the USD strengthens.”