Taiwan dollar unlikely to rise to NT$28 against greenback: Analyst

Taipei, May 5 (CNA) There is no room for the Taiwan dollar to rise to NT$28 against the greenback, although the U.S. dollar index (DXY) has recently slipped below the 100 mark, sparking fears of a potential currency war, a foreign exchange analyst has said.

After U.S. President Donald Trump announced on April 2 high "reciprocal" tariffs against many countries that have large trade surpluses with the U.S., including Taiwan, the DXY dropped nearly 3 percent in just 24 hours to 101.27, and it has since slid below the 100-mark as world markets react to the U.S. tariffs.

In Asia, as of the end of April, the Japanese yen had strengthened nearly 10 percent against the U.S. dollar, while the Korean won had surged 3.61 percent, and the Taiwan dollar had risen 2.39 percent.

A foreign exchange analyst, who spoke to CNA recently on condition of anonymity, noted that Taiwan's central bank said on May 1 that it had not received any request from the U.S. Treasury Department to push for an appreciation of the Taiwan dollar.

Furthermore, the analyst said, the market does not appear to be lined up for such a rise.

Intervention by Taiwan's central bank in the currency exchange rate has always been something that can be done but not openly acknowledged, given that Taiwan was included last November on the U.S. Treasury Department's currency "watch list" for the sixth consecutive time, according to the analyst.

The listing was based on criteria established under the Omnibus Trade and Competitiveness Act of 1988, which evaluates the foreign exchange practices of the U.S.' major trading partners to see if any of them are engaged in currency devaluation practices.

The U.S. Treasury Department uses three criteria to assess potential currency manipulation -- a bilateral trade surplus of at least US$15 billion with the U.S.; a material current account surplus of at least 3 percent of GDP; and evidence of persistent, one-sided foreign exchange intervention.

Taiwan currently meets the first two criteria, which means it is likely to remain on the watch list, according to the central bank.

The analyst said that until the Treasury Department's next semiannual report is released, Taiwan's central bank will remain cautious about any intervention to stabilize the local currency exchange rate.

The Taiwan dollar has soared sharply recently, amid expected pressure from the U.S. for appreciation of the currency.

At one point on Monday morning, the Taiwan dollar was trading at NT$29.675 against the greenback on the Taipei Foreign Exchange, up NT$1.389 from the previous close.

Last Friday, the Taiwan dollar rose NT$0.953, or 3.07 percent, to NT$31.064, its highest level since Jan. 9, 2024, when it closed at NT$31.023.

While Trump is likely to push Taiwan for a further appreciation of its currency, there is no consensus in the foreign exchange market on how high it might rise against the U.S. dollar, given Trump's unpredictability, the analyst said.

The analyst expressed the view, however, that "there is no room for appreciation to NT$28.00" against the U.S. currency.

Meanwhile, Chen Yu-chung (陳有忠), a foreign exchange analyst at Taishin International Bank, said Taiwan had previously experienced an outflow of hot money due to uncertainty surrounding Trump's aggressive tariff policy.

Chen noted that trade tensions have eased somewhat since Trump announced on April 9 a 90-day pause on his "reciprocal" tariffs, while maintaining a baseline universal tariff of 10 percent for most countries, except China.

As a result, the greenback has been sliding, while Taiwan's stocks have staged a rebound, and foreign investors have turned to net buying, Chen noted, adding that all of these factors have helped to boost the Taiwan dollar.

However, market fears remain about the ongoing tariff war and a potential currency war, he said.