Taiwan Dollar Rally Fades as Foreign Equity Inflows Slow
The New Taiwan dollar's strong run has hit headwinds as foreign equity inflows fade and technical resistance levels come into play, causing analysts to question its sustainability.
After experiencing its worst month in 11 years last month, the NT dollar had been on track for its best month since May of last year. However, a drop in foreign equity inflows has impaired this month's advance, according to Oversea-Chinese Banking Corp (華僑銀行) foreign exchange strategist Christopher Wong.
The forwards market has not widened materially, suggesting local exporters are not betting on an NT dollar rally. Wong noted that the currency pair currently faces near-term support at 31.80, but a more decisive drop would require a broader weakness in the US dollar and renewed foreign capital inflows.
Despite net inflows recovering from last month's slump, analysts warn that the local currency lacks fresh capital flow to return to pre-selloff levels. Inflows slowed to about $861 million last week from $6.5 billion in the prior week.