The Taiwan dollar has experienced recent weakness amid global concerns surrounding the artificial intelligence (AI) sector, but analysts remain optimistic about a currency rally through the end of 2026, citing Taiwan’s strong economic fundamentals. Despite short-term pressures driven by portfolio outflows and elevated technical sector risks, underlying factors such as robust trade surpluses and a sustained current account surplus support a medium-term outlook of appreciation.
In recent sessions, the Taiwan dollar fell to its lowest level since April 2025, influenced by persistent foreign selling of local equities. On October 15, foreign investors withdrew NT$302.6 billion (approximately S$11.9 billion) from Taiwan’s stock market, marking the largest one-day outflow on record. This capital flight pushed the currency close to its year-to-date low near 32.5 per US dollar. The Central Bank of the Republic of China (CBC) is expected to maintain a relatively stable exchange rate within a comfortable range between 31.5 and 32.5 against the US dollar, although it has not set a rigid intervention threshold.
Market watchers note that near-term headwinds for the Taiwan dollar include foreign equity outflows and a strong US dollar, reinforced by higher US Treasury yields compared to Taiwanese sovereign bonds. The 10-year US Treasury yield currently exceeds its Taiwanese counterpart by approximately 300 basis points, intensifying demand for the US dollar against regional currencies. Additionally, elevated crude oil prices weigh on Taiwan’s currency due to the island’s energy import dependence.
However, Taiwan’s economic indicators continue to highlight significant strengths. The island recorded a record current account surplus of nearly US$70 billion in late 2025, primarily driven by strong global demand for advanced semiconductors. Economic growth forecasts were recently revised upward to above 10% for 2026, positioning Taiwan for its first double-digit expansion since 2010.
Analysts at institutions such as OCBC Bank, ING Bank, and MUFG Bank project that these fundamentals will drive the Taiwan dollar to appreciate to around 31.5 to 31.8 per US dollar by the end of 2026, with some expecting further gains into mid-2027. They emphasize the role of Taiwan’s semiconductor sector, which benefits from the ongoing AI-driven technology cycle, as a key support factor for the currency.
Upcoming earnings reports from major semiconductor companies, including Taiwan Semiconductor Manufacturing Co., are closely monitored by currency strategists. While recent revenue outlooks have outperformed expectations, broader uncertainties about AI-related capital expenditure and competition—particularly from China—continue to present risks that may spur short-term volatility in the Taiwan dollar.
Overall, analysts suggest that despite periodic fluctuations, Taiwan’s currency remains well-positioned to recover and strengthen over the medium term, supported by robust export momentum, strong external balances, and resilient trade linked to the AI semiconductor industry.