## USD to TWD Short-term High-level Fluctuations, Market Cautions Re-emergence of May Rally

Following the release of the joint currency statement by Taiwan and the US, the trend of USD to TWD has attracted significant market attention. Although the exchange rate appreciated by 2 points early in the session, the gain was quickly narrowed, showing considerable volatility. According to analysis by CTBC Financial Holding, referencing precedents from Japan, South Korea, and other countries, signing similar statements may not immediately trigger drastic currency fluctuations. However, market participants remain cautious; if the strong upward trend seen in early May reappears, it could have a ripple effect on multiple industries in Taiwan.

The offshore non-deliverable forward (NDF) for TWD once surged by 4 cents after the statement was announced, highlighting a clear shift in market expectations for USD to TWD. Analysts pointed out that such sharp daily fluctuations could increase pressure on the foreign exchange market, and the central bank is expected to intervene appropriately to maintain exchange rate stability. From a historical perspective, the TWD once appreciated to around 28 during tariff negotiations. The current level of 31 definitely leaves room for appreciation, but the central bank will use proper measures to suppress excessive volatility.

Recently, CTBC Financial Holding held a corporate briefing, revealing that pre-tax earnings for the first three quarters of 2025 reached NT$69.96 billion, with after-tax earnings of NT$60.76 billion, and an EPS of NT$3.06. The return on equity remains high at 17.46%. The general manager’s spokesperson indicated that in the short term, the TWD is expected to fluctuate within the NT$30 range, while in the medium to long term, strong fundamentals will support its stability.

The Taiwan stock market opened higher today, with the weighted index rising more than 200 points in the early session, and major stocks like TSMC also climbing. However, analysts warn that foreign institutional investors have recently sold over NT$300 billion cumulatively, making it difficult for the weighted index to effectively break through 28,000 points. Capital flows are shifting from AI-related stocks to memory groups, forming a clear rotation trend.

If USD to TWD repeats the rapid appreciation seen in early May, it could impact Taiwan’s industrial landscape. Traditional manufacturing sectors will face dual pressures from tariffs and exchange rates, while the life insurance industry, holding large amounts of foreign currency assets, may see significant unrealized losses on paper. Additionally, tech stocks are facing concerns over inflated AI valuations, raising fears that the overall Taiwan stock market could retreat. This week’s market focus includes NVIDIA’s earnings report and Taiwan Futures Exchange’s settlement, with expectations that the Taiwan stock market will maintain a high-level fluctuation in the short term. Investors should closely monitor the potential impact of USD to TWD movements on various industries and adjust their positions accordingly.