Foreign capital inflow signals emerge; the USD/NTD exchange rate rises again, can the 31.4 level hold steady and become the focus?

The Dual Drivers Behind the Market Shift

The currency market has recently experienced noticeable changes. As Federal Reserve( officials repeatedly signal dovish policy stances, market expectations for rate cuts before the end of the year have reignited, directly impacting the US dollar’s strength. The US Dollar Index has declined from recent highs to around 100.16, with a significant drop, creating breathing room for Asian currencies. The New Taiwan Dollar (NTD) against the US dollar briefly touched 31.405 during today’s trading, appreciating over 4 points compared to the previous day. What signals are behind this rally?

Taiwan Stock Performance Drives Capital Reflow

Observing today’s market, Taiwan stocks led by electronic blue-chip stocks showed strong momentum, with substantial gains. This stock market rally not only attracted foreign investment but also coincided with export companies’ currency exchange needs at month’s end, forming a “stock and forex rally” scenario. The NTD opened at 31.42 and quickly appreciated, reaching a high of 31.405, demonstrating resilience in appreciation. This performance suggests renewed market interest in Taiwanese assets.

US Dollar Index Technical Reversal but Bullish Trend Not Fully Reversed

Although the NTD/USD exchange rate rebounded, traders warn investors to note an important fact: the US Dollar Index remains above the 100 level, maintaining a generally strong dollar trend. This indicates that despite recent declines, the dollar’s fundamental support remains intact, indirectly limiting further appreciation of Asian currencies. The NTD currently fluctuates around 31.415, and whether it can break higher depends on continued foreign capital inflows and the evolving strength of the dollar.

Key Data and Trading Insights

Banking sources point out that the core drivers behind this NTD rally are twofold: first, the rekindled expectation of Fed rate cuts weakening the dollar; second, the upward momentum in Taiwan stocks attracting capital inflows. If these two forces continue to develop, the USD/NTD exchange rate could challenge the 31.3 level. However, caution is advised regarding international variables, including US economic data trends and China’s economic developments, which could impact the Asian forex market.

Trading Recommendations and Market Outlook

For market participants, traders suggest exporters consider selling USD around 31.4 to lock in profits on rallies, while importers should patiently wait for pullback opportunities to re-enter. Whether the NTD/USD can stabilize above 31.4 will be a key indicator for the market’s future direction. A sustained hold above this level would signal continued foreign capital inflows, whereas a failure to do so would require reassessment of the market situation.