The Taiwan dollar experienced a remarkable surge, marking its most significant rise in nearly 40 years. Driven by promising economic growth data, expectations of reduced trade tensions, and robust earnings from U.S. tech companies, the currency appreciated around 3%, closing at 31.06 against the U.S. dollar on Friday. This noteworthy increase represents the largest single-day gain for the Taiwan dollar since 1988 and coincided with a 2.7% jump in the island’s benchmark stock index, outpacing regional markets.

Factors Behind the Surge

The currency’s impressive performance captured the attention of traders as optimism surrounding Taiwan’s economic prospects grew. The sentiment shifted positively following China’s announcement that it is considering trade talks with the United States. Key elements contributing to this bullish atmosphere include:

• Faster-than-expected economic growth: Taiwan’s economy is expanding more rapidly than anticipated.
• Increased semiconductor demand: Hopes that major U.S. tech companies will boost imports of semiconductors from Taiwan have added to market optimism.
• Local exporters’ actions: Exporters aggressively converted their earnings from U.S. dollars to the local currency, which helped amplify the dollar’s decline.

Christopher Wong, a strategist at OCBC Bank, noted, “Many market participants were caught off guard by the swift appreciation of the Taiwan dollar, leading to a rush to exchange U.S. dollars for local currency.” He added that the potential for dialogue between the U.S. and China has further fueled this trend.

Market Dynamics

Despite the rally, state-backed banks in Taiwan continued to purchase U.S. dollars during the afternoon, although their actions were consistent with routine operations. Traders observed that demand from importers and foreign investors was insufficient to counteract the aggressive selling by exporters.

Key market insights include:

• Exchange-traded funds: Managers were seen liquidating U.S. dollars as domestic clients redeemed investments in offshore markets.
• Spot market activity: The trading volume for the U.S. dollar against the Taiwan dollar reached its second-highest level in 2025.

Traders noted that there was no unusual intervention by the central bank, which typically acts during periods of high volatility. The central bank reiterated that the U.S. Treasury has not requested Taiwan to artificially inflate its currency.

Economic Growth Indicators

The Taiwan dollar’s surge positioned it as the leading emerging Asian currency for the year, boasting gains exceeding 6% against the U.S. dollar. Other Asian currencies, such as the South Korean won and Indonesian rupiah, also experienced gains of over 1% due to rising trade optimism.

The positive sentiment was bolstered by a statement from China’s Commerce Ministry indicating a willingness to engage in tariff discussions with U.S. officials, urging for sincerity from Washington. This development is particularly advantageous for Taiwan, given its close trading and political relationships with both major economies.

With the market reopening after a public holiday, traders reacted swiftly to the announcement of Taiwan’s fastest economic growth in a year during the first quarter. Strong performances by U.S. tech giants, including Microsoft and Meta Platforms, have also contributed to the bullish sentiment surrounding Taiwanese stocks. Analyst Jeff Pu from GF Holdings commented, “The better-than-expected capital expenditure from Microsoft and Meta suggests robust AI demand, which is beneficial for chip demand and consequently for Taiwan Semiconductor Manufacturing Co.”

Looking Ahead

While the Taiwan dollar has made impressive gains, analysts remain cautious about the sustainability of this rally. Khoon Goh, head of Asia research at Australia & New Zealand Banking Group, highlighted that the currency may encounter significant resistance around 31. Kiyong Seong, a macro strategist at Societe Generale in Hong Kong, remarked, “The Taiwan dollar’s upward momentum will likely decelerate, as the U.S. dollar continues to hold its status as a key reserve currency.”

In conclusion, while the Taiwan dollar’s recent performance is a cause for optimism, the future trajectory will depend on broader market perceptions and the ongoing economic landscape.