The New Taiwan Dollar drops to 31.475, hitting a nearly seven-month low. Will the selling pressure from foreign investors continue to decline? The market remains cautious.

Double blows overshadow Taipei’s stock and forex markets. The Taiwan stock market dropped over 500 points during trading today, ending with a sharp decline of 330 points; the New Taiwan dollar, meanwhile, was pushed by foreign capital withdrawals and selling pressure, breaking through the 31.5 yuan level in the afternoon and closing at 31.475 yuan, a depreciation of 9.5 cents, hitting the lowest level in nearly seven months. Forex trading volume expanded to 20.56 billion USD, reflecting increased market activity.

Foreign capital withdrawal dominates, Taiwan dollar remains under pressure

The New Taiwan dollar opened today at 31.38 yuan, then gradually weakened amid a surge of foreign exchange purchases driven by foreign capital repatriation. Although exporters sold some positions to take advantage of the trend, this force was still no match for the net capital outflows, and the exchange rate continued to approach the 31.5 yuan support level. After closing at 31.485 yuan at midday, the depreciation further widened.

Foreign exchange analyst Li Qizhan pointed out that the core driver behind the simultaneous decline of stocks and the currency is the intensifying foreign capital exit. After a net sale of nearly 48.9 billion TWD in the previous trading day, the selling pressure from foreign investors today remains fierce, becoming the main driver of the New Taiwan dollar’s depreciation. He predicts that once the 31.5 yuan level is broken, the New Taiwan dollar may enter a short-term volatile and weak pattern. If the Taiwan stock market drops another over 500 points tomorrow, the depreciation pressure in the forex market could further intensify, even risking testing the 31.6 yuan level.

Bank officials are more cautious, believing that the New Taiwan dollar still has room to depreciate before the end of the year. However, they also point out that the 31.5 yuan level is not only a relatively satisfactory trading price for exporters but also within the central bank’s policy tolerance range.

Global variables surge, deepening pressure on the New Taiwan dollar

Apart from foreign capital movements, uncertainties in the international market also exert additional pressure on the Taiwan dollar. Concerns about the prospects of the artificial intelligence industry have increased, triggering sharp volatility in US tech stocks, which in turn impacts related sectors in Taiwan. Additionally, with the Christmas holiday approaching, foreign institutions are gradually entering a rest mode, amplifying the pressure of capital reallocation and position adjustments. As long as foreign investors continue to withdraw from Taiwan stocks, the New Taiwan dollar will find it difficult to escape depreciation.

It is also worth noting that regional currencies are facing pressure. The Korean won has been falling more sharply against the US dollar since this month, approaching the psychological threshold of 1,500 won, with the monthly decline possibly marking the worst since the 2008 financial crisis, prompting South Korea’s government to hold emergency meetings. Meanwhile, the US dollar index has slightly retraced to around 98.2, and the RMB midpoint has slightly risen.

US economic data becomes key, market focuses on capital flows

Looking ahead, market attention has shifted to a series of upcoming US economic data releases. These figures are crucial for the Federal Reserve’s assessment of interest rate cuts next year and will directly influence global capital allocation. Over the past two trading days, the Taiwan stock market has already fallen more than 660 points, with both stocks and forex hitting bottom, increasing market caution. Until foreign capital movements become clearer, the weak trend of the New Taiwan dollar is unlikely to see substantial improvement.