Taiwan Dollar: Strong exports fail to ease FX pressure – Commerzbank

Taiwan’s record export orders, fuelled by AI-related ICT and electronics, point to a strong export-led expansion into Q4, according to Commerzbank’s Lay and Hao. While the Central Bank of the Republic of China has upgraded its GDP forecasts on expectations of a sustained technology investment cycle, it remains in wait-and-see mode on interest rates. Meanwhile, capital outflows and wider rate differentials are pushing USD/TWD higher.

AI boom bolsters growth but puts pressure on TWD

"Taiwan's export orders surged 62.4% yoy to a record USD114.2bn in September, slightly above the Bloomberg consensus of 61.7%, although growth moderated from 71.4% in August. This marked the 20th consecutive month of annual growth. Q3 orders reached a record USD315.1bn, up 65.0% yoy, underscoring the sustained strength of global demand for AI-related products. "

"Nonetheless, the latest figures reinforce the Central Bank of the Republic of China’s (CBC) assessment that Taiwan's economy is benefiting from a sustained technology investment cycle rather than a short-lived recovery in external demand. CBC raised its 2026 GDP growth forecast to 11.48% in September, while projecting a moderation to 5.82% in 2027, partly reflecting a higher base."

"Despite the exceptionally strong growth outlook, the latest export orders are unlikely on their own to prompt further monetary tightening. CBC held its policy rate at 2.0% in September, although inflation risks are seemingly rising. Headline CPI inflation accelerated to 2.73% yoy in September, above the CBC's full-year forecast of 2.03%, while elevated energy prices and persistent services inflation remain key concerns. CBC is likely to maintain its wait-and-see stance, assessing whether price pressures become more persistent before considering further tightening."

"For TWD, strong export performance and Taiwan's substantial external surplus provide underlying support, but near-term movements remain dominated by foreign portfolio flows and global risk sentiment. USD/TWD has risen by 3.8% to 32.60 since its early September low of around 31.40."

"This was driven by the firmer USD, capital outflows, and higher interest rate differential vs USD. CBC has emphasised its willingness to intervene to contain excessive exchange-rate volatility. Given the rapid rise in the past month, we could see CBC step up intervention to restrain the upside in USD/TWD."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)