The wave of foreign capital withdrawal is coming, and the New Taiwan Dollar has fallen below the 31.5 integer level—Western and US capital flow has become a key variable.

Taipei stock and foreign exchange markets faced a double whammy today amid continuous foreign capital withdrawals. The Taiwan stock index plummeted over 500 points during the session, closing down 330 points; the New Taiwan dollar against the US dollar also depreciated sharply, breaking below the 31.5 mark in the afternoon, and closing at 31.475, a decline of 9.5 cents, hitting a nearly seven-month low. The daily foreign exchange trading volume expanded to 20.56 billion USD, indicating extreme market volatility.

Foreign capital selling dominates, the short-term trend of the New Taiwan dollar is now set to weaken

The New Taiwan dollar opened today at 31.38, then gradually weakened due to dollar buying pressure. Although exporters attempted to sell foreign exchange opportunistically, it was not enough to counteract the outflow of funds, and the exchange rate continued to slide toward the 31.5 support level. The midday close was at 31.485, with further weakening in the afternoon.

Foreign exchange analyst Li Qizhan pointed out that the core driver behind the synchronized decline of stocks and the currency is the strong withdrawal of Western US capital. After foreign investors sold nearly 48.9 billion TWD of Taiwan stocks on the previous trading day, they continued to sell and exchange US dollars today. Experts believe that once the 31.5 level is broken, the New Taiwan dollar will enter a volatile and weak pattern. If Taiwan stocks suffer another drop of over 500 points tomorrow, the depreciation pressure on the forex market could intensify further, possibly testing the 31.6 level.

Banking industry officials generally estimate that the New Taiwan dollar still has room to depreciate before the end of the year. The 31.5 level is a range that exporters are relatively willing to accept and also within the central bank’s tolerable range.

International developments intensify Taiwan dollar pressure, Asian currencies generally face Western US impact

Apart from foreign capital factors, uncertainties in international markets are also exerting additional pressure on the New Taiwan dollar. Concerns about the prospects of the AI industry have increased, causing sharp fluctuations in US tech stocks, which adversely affect related Taiwan stock sectors. With Christmas holidays approaching, Western US capital is gradually withdrawing from Asian markets for year-end portfolio adjustments, creating a concentrated sell-off wave. As long as foreign investors continue to withdraw from Taiwan stocks, the depreciation pressure on the New Taiwan dollar will remain unresolved.

It is worth noting that the weakening of the Taiwan dollar is not an isolated phenomenon. Major Asian currencies have also been under pressure recently. The Korean won against the dollar has been declining more sharply since December, approaching the 1500 mark, and may record its worst monthly decline since the 2008 financial crisis, prompting the South Korean government to hold an emergency meeting to seek countermeasures. The US dollar index has slightly retreated to around 98.2, while the RMB midpoint has slightly risen.

The key to the future market depends on US economic data, and global capital flows will determine the fate of the Taiwan dollar

Looking ahead, market focus has shifted to a series of upcoming US economic data releases. These data will directly influence the Federal Reserve’s judgment on the timing of rate cuts next year and will affect the global deployment of Western US capital. Over the past two trading days, the Taiwan stock index has fallen more than 660 points, with stocks and forex both hitting bottom, increasing market caution. In the short term, the interaction among foreign investor movements, US economic trends, and Fed policy expectations will determine whether the New Taiwan dollar can regain support.