The Taiwan dollar fell to its weakest level since May, pressured by heavy foreign selling of local stocks and a stronger U.S. dollar. Taiwan’s currency traded at 31.752 per dollar, the lowest since May 2, as investors pulled NT$94.7 billion ($3 billion) from Taiwanese equities on Tuesday—the most since September 2024. This exodus reversed a late-week buying spree that briefly lifted the dollar to its strongest level this year. Non-deliverable forwards for USD/TWD climbed above 32, signaling bearish sentiment and potential further weakness if geopolitical tensions persist. The greenback’s gains stem from demand for safe-haven assets amid Middle East uncertainty and expectations that rising energy prices may delay Federal Reserve rate cuts.

Wednesday’s decline follows a sharper drop in the South Korean won, which rebounded after local intervention. In both markets, investors are locking in equity gains from the recent AI-driven rally amid heightened risk aversion. The Taiwan dollar’s retreat follows a reversal of its late-week advance, where overseas funds made their largest one-day stock purchase in two decades. This shift reflects broader regional volatility as geopolitical shocks reshape capital flows.

Derivatives pricing now anticipates continued dollar strength, with one-month non-deliverable forwards at their highest since April. Trading volumes in the Taiwan dollar surged to 2015 highs, underscoring heightened market sensitivity to Middle East developments and U.S. monetary policy cues. The currency’s weakness could pressure Taiwanese exporters and corporate earnings, though immediate policy responses remain unclear.