The Taiwan dollar weakened against the U.S. dollar for a second consecutive session on September 3, pressured by sustained heavy foreign selling of Taiwanese stocks and capital outflows. The currency closed at NT$31.755, down 2.7 cents, a daily decline of 0.09%, making it the weakest performer among major Asian currencies. Combined trading volume in the Taipei and Yuan Tai foreign exchange markets shrank to $2.731 billion (approximately NT$87 billion), cooling significantly from the prior day’s surge.
Foreign investors sold a net NT$48.146 billion (approximately $1.5 billion) worth of shares in Taiwan’s concentrated market on September 3, following the previous day’s net selling of NT$91.354 billion (approximately $2.9 billion). The two-day total withdrawal from Taiwan’s stock market approached NT$140 billion (approximately $4.4 billion), with funds being steadily repatriated, serving as the primary drag on the Taiwan dollar. Taiwan’s three major institutional investor categories sold a combined net NT$63.711 billion (approximately $2.0 billion) on September 3. The Taiwan Stock Exchange Capitalization Weighted Stock Index plunged 307 points in late trading, breaking below the 46,000-point psychological level to close at 45,857.66.
Currency traders noted that the Taiwan dollar opened at NT$31.75 on September 3 and briefly strengthened to NT$31.7 in early trading amid a softer U.S. dollar. However, as foreign capital outflow pressure mounted, the currency slid to an intraday low of NT$31.827 in the afternoon, briefly breaching the NT$31.8 threshold. The full-day trading range spanned 1.27 cents. Taiwan’s Central Bank stepped in during late trading to narrow the decline, and the currency ultimately recovered the NT$31.8 level to close at NT$31.755.
Notably, the Taiwan dollar’s depreciation has diverged sharply from other Asian currencies. According to Taiwan’s Central Bank statistics, most major non-U.S. dollar currencies strengthened on September 3. The Japanese yen surged 1.62% after Bank of Japan Governor Kazuo Ueda signaled a potential rate hike, while the South Korean won gained 0.66%, the Singapore dollar rose 0.33%, the Chinese yuan edged up 0.06%, and the euro advanced 0.23%. Only the Taiwan dollar bucked the trend, falling 0.09% to become the weakest Asian currency of the day.
Looking at year-to-date performance, the South Korean won has appreciated 6.54% to lead Asian currencies, followed by the Chinese yuan at 4.03% and the Singapore dollar at 1.36%. The euro has depreciated 1.12%, the Taiwan dollar has fallen 1%, and the Japanese yen has declined 0.36%. The Taiwan dollar remains in a relatively weak position among major currencies.
U.S. Treasury Turmoil and Geopolitical Tensions
The macro backdrop for the Taiwan dollar’s depreciation is closely tied to recent violent swings in global financial markets. Military conflict between the United States and Iran has escalated once again, with U.S. forces striking Iran’s Islamic Revolutionary Guard Corps, raising concerns over global energy supplies. Brent crude has broken above $95 per barrel, while West Texas Intermediate has reclaimed the $90 mark, reigniting inflation fears.
At the same time, Federal Reserve officials have signaled a hawkish tilt, and concerns over the U.S. fiscal deficit have triggered a sell-off in global bond markets, sending the 10-year U.S. Treasury yield sharply higher. The U.S. Dollar Index has experienced heightened volatility amid safe-haven inflows, falling 0.45% on September 3 but remaining in an elevated range overall.
Currency analysts noted that global financial markets are grappling with the fallout from the U.S. Treasury sell-off, with the U.S. Dollar Index swinging more violently. When the dollar weakens, Asian currencies would normally find support, but the Taiwan dollar is caught in a crossfire due to sustained foreign selling of Taiwanese stocks, leading to heightened short-term volatility and a decoupling from regional peers.
Yen Rebound and Central Bank Policy Outlook
The Japanese yen’s recent dramatic swings have added another layer of uncertainty to Asian currency markets. The yen had briefly weakened past the 160-per-dollar level before sharply rebounding to the 158 range on September 2. Market participants interpret U.S. Treasury Secretary Scott Bessent’s recent public urging for Japan to raise rates as a signal that the 160 level may have become a new line in the sand jointly defended by Washington and the Bank of Japan.
The Bank of Japan is scheduled to hold its monetary policy meeting on September 17-18, and markets have already largely priced in a quarter-point rate hike this month. Governor Ueda faces a difficult dilemma: on one hand, Washington is pressing for higher rates; on the other, the strength of Japan’s economic recovery remains uncertain. A sustained yen rally would create competitive pressure on other Asian currencies, though it could also divert foreign capital outflows away from emerging markets.
Near-Term Consolidation and Key Watch Points
Foreign exchange traders noted that Federal Reserve Chair Christopher Waller’s hawkish remarks, combined with escalating U.S.-Iran hostilities, have clearly shifted financial market sentiment. The Taiwan dollar’s appreciation trend since August has temporarily come to a halt, giving way to a consolidation phase. The currency’s trajectory will depend on Taiwan’s stock market performance and foreign investor activity, with near-term trading expected to range between NT$31.5 and NT$31.9.
Currency analysts further noted that after two consecutive days of heavy selling in Taiwan’s stock market, foreign investors may continue to work through their selling momentum. The Taiwan dollar could test the NT$31.8 level again; if that support fails, the next target would be the NT$32 psychological threshold.
Market attention has now shifted to the Federal Reserve’s interest rate decision meeting in mid-September. With the probability of a rate hike rising, the Fed’s policy decision and post-meeting commentary will drive dollar movements and international capital flows, which in turn will shape Taiwan’s stock and currency market performance. The Bank of Japan’s mid-September meeting outcome is equally critical—if the yen continues to strengthen on a rate hike, it could further highlight the Taiwan dollar’s relative weakness.
Looking back at the previous session on September 2, the Taiwan dollar came under dual pressure from foreign investors’ massive net selling of NT$91.354 billion (approximately $2.9 billion) in Taiwanese stocks and accelerated hot money outflows. The currency plunged as much as 1.71 cents intraday to a low of NT$31.804 before closing at NT$31.728, down 9.5 cents—a more than one-week low. Combined trading volume in the Taipei and Yuan Tai foreign exchange markets surged to $3.748 billion (approximately NT$120 billion), a recent high. Over the two sessions, the Taiwan dollar has cumulatively depreciated 1.22 cents, a decline of approximately 0.38%.
Exporters stepping in to sell U.S. dollars above the NT$31.7 level, along with Taiwan’s Central Bank’s late-session intervention, have served as key buffers that helped narrow the Taiwan dollar’s losses over the past two days. Foreign exchange traders said foreign investors were almost uniformly on the sell side on September 3, particularly intensifying their dollar buying in the afternoon, which accelerated the Taiwan dollar’s decline. However, exporter dollar selling and the central bank’s stabilization measures provided timely support.
Looking ahead, in addition to Middle East developments and hot money flows, markets are closely watching the Federal Reserve and Bank of Japan policy meetings. If the Fed delivers a more explicitly hawkish message, the dollar could strengthen further, adding pressure on the Taiwan dollar. Conversely, if the Bank of Japan raises rates as expected and the yen strengthens, the competitive dynamics among Asian currencies could make the Taiwan dollar’s weakness even more pronounced.
