Central Bank Issues Stern Warning as Taiwan Dollar Strengthens Sharply
In response to a steep appreciation of the Taiwan dollar against the U.S. dollar, Taiwan’s central bank issued a rare and strongly worded public statement on Monday urging market participants, analysts, and commentators to avoid stoking speculative expectations of continued gains. The move comes as the Taiwan dollar appreciated 6.21% in just two trading sessions — a pace described by Governor Yang Chin-long as “abnormal” and potentially harmful to economic stability.
The Central Bank’s Concerns: A Closer Look
The New Taiwan Dollar (TWD) rose from NT$31.064 to NT$30.145 against the greenback in just two sessions — an unusual surge that caught even experienced analysts off guard. Bank officials believe that overzealous media narratives and speculation about Taiwan’s foreign exchange policy and its role in U.S.-Taiwan tariff talks have contributed to an unsustainable bullish trend.
The central bank warned that such narratives create market distortions, incite panic among businesses, and could provoke retaliatory speculation — a move that would harm Taiwan’s exporters, especially its core industries in electronics and precision manufacturing.
“We call on commentators to act responsibly and on enterprises to avoid short-term emotional decisions like rushing to sell USD reserves,” the central bank stated.
Are Tariff Talks the Cause of the Surge?
The Taiwanese media has been reporting that a so-called “Mar-a-Lago Accord” is influencing the currency. This informal term, referencing former U.S. President Trump’s Florida estate, describes a pattern where the U.S. pressures trade partners into both lowering tariffs and appreciating their currencies to favor U.S. exporters.
However, both the central bank and Taiwan’s Office of Trade Negotiations strongly deny that exchange rate manipulation or coordination is part of ongoing discussions with Washington. According to officials, the bilateral talks—first held in person in Washington on May 1—are strictly focused on tariffs, non-tariff barriers, and economic cooperation.
Trade Surplus, Not Currency Policy, Driving U.S.-Taiwan Imbalance
Much of the public concern stems from Taiwan’s ballooning trade surplus with the U.S., which rose from US$47.8 billion in 2023 to US$73.9 billion in 2024, largely driven by booming American demand for Taiwan’s semiconductors and ICT products.
While critics have argued that Taiwan’s central bank could be under quiet pressure from Washington to allow a stronger TWD, the U.S. Treasury Department has repeatedly stated in its biannual currency reports that Taiwan is not a currency manipulator.
Taiwan’s central bank emphasized that it only intervenes in currency markets to smooth volatility, not to achieve a trade advantage.
Economic Risks of a Strong Taiwan Dollar
A strong Taiwan dollar poses multiple risks:
- Export Competitiveness – Taiwan’s economy is heavily export-driven. A stronger TWD makes goods more expensive to foreign buyers, threatening Taiwan’s dominance in tech exports.
- Investment Deterrent – A volatile exchange rate environment can deter foreign investment, particularly in sensitive sectors like semiconductor R&D.
- Speculative Bubbles – Currency surges based on rumors can cause instability in other sectors, especially real estate and financial instruments tied to dollar holdings.
Central Bank Intervention and the U.S. Century Bond Rumor
Governor Yang Chin-long admitted the bank had stepped in to “smooth out market volatility” but denied engaging in strategic manipulation. He also addressed rumors about the U.S. potentially converting Treasury holdings into “century bonds”—a 100-year debt instrument once proposed by Stephen Miran, now chair of the U.S. Council of Economic Advisers.
“The Trump administration has not adopted this as policy,” Yang said, citing clarifications from both Stephen Miran and U.S. Treasury Secretary Scott Bessent, who confirmed there are no current plans to issue century bonds.
Strategic Implications and Final Thoughts
This episode highlights how deeply entwined currency, trade, and geopolitics have become for Taiwan — a country caught between global supply chains and big-power negotiations. Analysts suggest Taiwan should strengthen communication strategies to combat market misinformation, enhance currency risk education for exporters, and maintain transparency in future trade discussions.
While Taiwan’s central bank has taken an important step by addressing speculative behavior, further market literacy and policy coordination between ministries may be needed to prevent future instability triggered by rumor-fueled movements.
FAQs
Why is the Taiwan dollar strengthening so fast?
It’s partly due to speculative media coverage, but also due to Taiwan’s large trade surplus with the U.S. and investor expectations of tariff reductions.
Is Taiwan being pressured to raise its currency value by the U.S.?
No formal pressure has been confirmed. Taiwan’s central bank and trade office deny any such clause in U.S.-Taiwan trade talks.
What is the Mar-a-Lago Accord?
An unofficial term referring to the belief that the U.S. encourages trading partners to appreciate their currencies as part of trade negotiations. It is not a formal agreement.
Is Taiwan manipulating its currency?
No. The U.S. Treasury has not labeled Taiwan a currency manipulator, and Taiwan’s central bank says it only intervenes to manage volatility.
What are U.S. century bonds?
These are hypothetical 100-year bonds once suggested by U.S. economist Stephen Miran. The U.S. Treasury has confirmed it has no plans to implement them.
