The central bank’s words cannot stop foreign capital from remittances! New Taiwan dollar loses 7 times in a row, Huiyin reveals the key to stopping depreciation

After the Taiwan dollar's exchange rate plummeted against the U.S. dollar last week, the downward trend continued on Monday. Even though the central bank rarely made an intraday call to stabilize the exchange rate, it was still difficult to resist the continued pressure from foreign capital to remit. It fell to a low of 32.572 yuan in the afternoon, hitting a new low in nearly 18 months. In late trading, under the adjustment of the central bank, it finally closed at 32.445 yuan, a depreciation of 1.07 cents. The exchange rate was negative for 7 consecutive times. The total trading volume of Taipei and Yuantai Foreign Exchange Brokerage Company was 3.854 billion US dollars.

The Taiwan stock market fell 289.18 points today to close at 46822.08 points. The three major legal entities sold a total of more than 89.954 billion yuan, of which foreign investors continued to sell more than 76.742 billion yuan. The pressure of fund remittance continued to contain the trend of the New Taiwan Dollar.

After the New Taiwan Dollar opened at 32.36 yuan this morning, selling pressure continued to emerge, and it once fell below the 32.5 yuan mark in the morning. After the central bank issued a statement during the session, explaining the source of pressure on the depreciation of the New Taiwan dollar and emphasizing that it would make timely adjustments to the supply and demand of the foreign exchange market, the decline temporarily converged at midday. However, as foreign stock selling funds were repatriated in the afternoon, the exchange rate fell again, hitting a minimum of 32.572 yuan. In late trading, it was adjusted back to 32.4 yuan by the central bank.

Huiyin analysts analyzed that the central bank's intraday statement was mainly to stabilize market expectations, not to declare defense at a specific price. In principle, the central bank still respects the market supply and demand mechanism. In the face of large-scale foreign remittances, it will not blindly block the depreciation. Instead, it will provide U.S. dollar liquidity in a timely manner depending on market conditions to avoid short-term supply and demand imbalances that trigger severe exchange rate fluctuations and slow down the depreciation of the Taiwan dollar.

Huiyin people pointed out that the South Korean won was also hit by the withdrawal of foreign capital this year, and the exchange rate fluctuated violently. It fell to 1,555 won per US dollar at the end of June, a new low in more than 17 years. As of early July, the cumulative decline this year was close to 6%; however, the South Korean won rebounded significantly subsequently, and has recently risen to around 1,330 won per US dollar.

In comparison, the New Taiwan dollar faced huge pressure from foreign capital net remittances of nearly US$18 billion last week, with a single-week decline of 1.37%. The operation of the foreign exchange market is still relatively orderly, which also reflects the central bank's policy direction of maintaining dynamic stability of the exchange rate.

Looking ahead to the market outlook, Huiyin people believe that the key to whether the New Taiwan dollar can stop its depreciation lies in the movement of foreign capital. The good news is that after the Philadelphia Semiconductor Index closed in the black for eight consecutive trading days, U.S. stock futures rebounded during the Asian trading session today. Market panic has slightly cooled down. Japanese and Korean stock markets have rebounded simultaneously, and Taiwan stocks have also largely converged on their falling points. If U.S. technology stocks stop falling and concerns about AI investment ease in the future, foreign capital will have a chance to reduce its adjustment efforts, thereby easing the pressure on remittances and slowing down the depreciation of the New Taiwan Dollar.