NTD breaks through the 31.4 mark! The dual drivers behind foreign capital inflows and the Fed's shift in stance

The US dollar pattern is changing, and the Taiwan dollar responds accordingly. Today, driven by Asian markets, the New Taiwan dollar against the US dollar temporarily broke through the 31.405 level, appreciating by 4.2 cents, sparking widespread market discussion—“a clear signal of foreign capital returning.” This rally may seem sudden, but there have been early signs.

Fed’s Dovish Shift and the US Dollar’s Inability to Maintain High Levels

Recently, Federal Reserve officials have signaled a tendency to cut interest rates, and market expectations for a rate cut in December have significantly increased. Under this expectation, the US dollar index retreated from its previous high to around 100.16, indicating a loosening of its relatively strong pattern. Major Asian currencies, including the yen and won, have also gained breathing room, further boosting the appreciation momentum of the New Taiwan dollar.

Taiwan Stock Market’s Rally Supports the TWD’s Rise

Today, Taiwan stocks surged significantly, led by major electronics stocks, as the approaching month-end prompted exporters to convert foreign exchange into TWD. These dual factors drove the New Taiwan dollar to open at 31.42 and quickly rise to around 31.405, demonstrating strong upward momentum. The Taiwan stock market and the TWD are forming a positive interaction, attracting short-term capital flows.

US Dollar Still Has Support; Limited Upward Potential for Asian Currencies

Although the New Taiwan dollar performed strongly, analysts warn that the US dollar index remains firmly above 100, and the overall global dollar pattern still leans toward strength. This structural factor constrains further appreciation of the TWD. Currently, the TWD is consolidating around 31.415, and whether it can break through the 31.3 level will depend on net foreign capital inflows and the movement of the US dollar index.

Practical Trading Recommendations

Banking and forex professionals believe that if the Fed’s rate cut expectations continue to rise and Taiwan stocks attract capital, challenging the 31.3 level for the TWD is not impossible. However, traders are also advised that the international forex market shows mixed signals, and China’s economic performance will also impact Asian currencies. Exporters are suggested to sell on rallies near 31.4 to lock in profits, while importers should wait for pullback opportunities to enter positions, avoiding buying at high levels.

The recent movement of the TWD has influenced market sentiment, with foreign capital flows and central bank actions becoming key points for future observation. As global rate cut expectations increase, whether the TWD can maintain its appreciation trend will be an important indicator of the flow of hot money into Asia.