The Taiwan dollar weakened past the key psychological level of 33 per US dollar for the first time since April 2025, as a broad retreat in artificial intelligence shares weighed on the island's tech-heavy equity market. The currency fell as much as 0.5% to 33.040 per US dollar on Friday, while a gauge of the island's stocks dropped around 8%.
The equity slump deepened after Democrats swept the US Congressional elections. The victory fueled concern that shifting political priorities could tap the brakes on breakneck AI growth and massive hardware spending. Sustained selling in local tech shares typically piles pressure on the Taiwan dollar, as foreign investors offloading domestic equities convert their proceeds back into foreign currencies, sapping demand for the local unit.
"Taiwan's heavy exposure to the semiconductor and AI supply chains makes it particularly vulnerable to concerns that tighter US regulation could slow AI infrastructure investment following the midterm elections," said Christopher Wong, a strategist at Oversea-Chinese Banking Corp.
"Near term, we expect the Taiwan dollar to remain volatile, with equity market performance and foreign portfolio flows likely to dominate FX direction," he said, adding that there is a near-term risk of the currency weakening to 33.30 per US dollar. Local equities suffered record foreign outflows last month, sinking the currency to the bottom of Asian performance rankings. The slide has deepened despite a recent central bank decision to ease restrictions on US dollar sales by exporters, a move aimed at reducing depreciation pressure on the Taiwan dollar.
Source: Bloomberg Markets · Summarized by HeadlinesBriefing