The TWD depreciation is hard to stop; behind the 31.6 yuan barrier's collapse lies a hidden capital flow

The New Taiwan Dollar exchange rate continues its weak trend today, falling below the key round figure of 31.600 and reaching a lower trough of 31.620. The single-day depreciation is approximately 0.32%, nearly a tenth of a dollar compared to the previous trading day’s close. This wave of depreciation is not an isolated event but the result of multiple factors stacking together.

Dual Pressure from Dividend Outflows and a Strong US Dollar

The dividend payout from TSMC became the direct trigger for the New Taiwan Dollar’s pressure today. Foreign investors, after receiving dividends, immediately engaged in large-scale currency outflows, pushing the exchange rate below the 31.600 round figure within just an hour after market open. Meanwhile, the US dollar index has recently been mildly rising, exerting systemic pressure on Asian currencies including the New Taiwan Dollar. The relative volatility of the RMB against the Taiwan Dollar also confirms the overall weakening trend of Asian regional currencies. This “internal and external” dilemma makes it difficult for the New Taiwan Dollar to find a breathing space.

Industry Differentiation: Exporters Benefit, Import-Driven Companies Under Pressure

The depreciation of the exchange rate shows a clear polarization effect at the industry level. Electronics exporters, with large USD assets and overseas sales contracts, will directly benefit from increased foreign exchange gains. If the depreciation trend continues until the end of this quarter, it will positively impact next quarter’s financial results and may serve as a catalyst for stock price increases.

Conversely, domestically oriented companies heavily reliant on imported raw materials face obvious difficulties. Industries such as food, retail, and airlines, with limited pricing power, will see rising import costs directly compress gross profit margins. Investors should carefully assess their profit resilience. Notably, small- and mid-cap stocks and industry-specific stocks may perform individually under this environment, with a gradually emerging scenario dominated by domestic capital.

Support Levels and Rebound Momentum Battle

The short-term direction of the currency market hinges on the gains and losses around two major support levels: 31.600 and 31.800. If the depreciation accelerates further and breaks through 31.800, it could trigger accelerated foreign capital withdrawal, adding additional selling pressure on large-cap stocks.

However, as the Lunar New Year approaches, the release of year-end bonuses by exporters and actual foreign exchange needs will gradually surface. When the exchange rate drops to certain levels, selling and buying orders are expected to provide support, forming a natural buffer. Additionally, the central bank’s policy stance and intervention willingness in the closing phase of trading will be key variables in determining whether the exchange rate stabilizes.

Investment Strategy Recommendations

For Taiwan stock investors, currency fluctuations have become an unavoidable risk variable. Portfolio allocation should focus on sectors with export competitiveness while increasing caution toward companies sensitive to rising import costs. Keeping a close eye on the USD/TWD and CNY/TWD exchange rate dynamics will help in making more precise asset allocation decisions.