According to a recent report by the Taiwan Institute of Economic Research (TIER), the New Taiwan dollar is expected to experience depreciation pressure this year, averaging NT$32.34 per US dollar. This forecast represents a decline from the previous prediction, reflecting broader economic trends and policy shifts. The institute highlights that despite strong global demand for advanced technologies like artificial intelligence and high-performance computing, which bolster Taiwan's economic fundamentals, external factors are likely to impact the currency's value. The pace of US Federal Reserve interest rate cuts and uncertainties surrounding US trade policies contribute significantly to these pressures.
Details on Currency Depreciation and Economic Factors
In the vibrant autumn season, the Taiwan Institute of Economic Research released its outlook for Taiwan’s economic development, emphasizing ongoing challenges for the New Taiwan dollar. The currency, alongside other Asian currencies, saw a brief rise following the Bank of Japan's interest rate hike, settling at NT$32.682 against the US dollar. However, this upward movement is expected to be temporary. Taiwan's financial markets are currently closed for the Lunar New Year holiday, but the underlying issues persist.
The institute forecasts that the NT dollar will continue to face depreciation pressure against the US dollar due to slower-than-expected interest rate cuts by the US Federal Reserve and increased uncertainty about US trade policies. Despite robust global demand for AI applications and high-performance computing devices, which support Taiwan's economy, these external factors could overshadow domestic strengths. Additionally, Taiwan's significant trade surplus with the US has raised concerns about potential US tariffs, especially given the nation's inclusion in the US Department of the Treasury's currency watchlist.
To mitigate these risks, Taiwan's Central Bank Governor Yang Chin-lung suggested expanding purchases of energy, agricultural goods, and military products from the US. Increased investments by Taiwanese firms in the US could also help reduce the trade deficit. These strategies aim to balance trade relations and stabilize the currency amidst global economic turbulence.
The report underscores that various factors, including changes in US economic and trade policies, the trajectory of major central banks' monetary policies, the effectiveness of China's economic stimulus measures, and Taiwan's domestic investment momentum, will shape the future economic landscape. These elements not only influence Taiwan's export performance but also affect domestic demand and consumption through financial markets and import prices.
From a journalist's perspective, this report serves as a reminder of the interconnectedness of global economies and the importance of proactive policy measures. It highlights the need for continuous observation and analysis to navigate the complex web of international trade and finance. Understanding these dynamics can help policymakers and businesses prepare for potential challenges and seize opportunities in an ever-evolving economic environment.