The Taiwan dollar has surged to its strongest level since 2022, creating challenges for the nation’s export-focused companies. Manufacturing, foundries and semiconductors are among the most exposed industries, with smaller and medium-sized businesses particularly vulnerable due to limited hedging strategies. After an early May surge, the Taiwan dollar reached a peak on July 3, standing 14 per cent stronger against the US dollar compared to the start of the year. The impact of this rise is expected to become evident in the current quarter’s earnings reports.
Smaller companies with fewer resources and hedging options are at greater risk from the currency’s appreciation, according to Fidelity International Fund Manager Vivian Pai. In contrast, major exporters like Taiwan Semiconductor Manufacturing and Hon Hai Precision Industry have more advanced hedging strategies and diverse revenue streams, enabling them to better manage currency fluctuations. Taiwan Semiconductor Manufacturing, for example, is a global leader in semiconductor manufacturing, producing chips for a wide range of applications. Hon Hai Precision Industry, also known as Foxconn, is a multinational electronics manufacturer and one of the largest contract manufacturers in the world.
Bloomberg Intelligence analyst Marvin Chen noted that a stronger local dollar could potentially attract equity inflows by increasing equity returns. However, it also poses risks to the earnings of export-oriented businesses. Earnings growth forecasts for Taiwan have been revised downwards since July, influenced by currency concerns and US tariffs, according to Bloomberg Intelligence data. The third-quarter earnings season in Taiwan is scheduled to begin in October.
HSBC analysts, led by Paul Mackel, observed that the Taiwan dollar has become more sensitive to equity outflows as foreign investors’ ownership approached record highs at the end of July. They added, “We continue to expect lower USD-TWD in the coming months as the Fed’s easing will help reduce hedging costs and cap bond outflows, but we have moderated the scale of the drop in our new forecasts.”
