Improved risk appetite tied to a potential U.S.-Iran peace deal and a reopened Strait of Hormuz lifted the currency to a nearly three-week high, while July's record $28 billion remittance outflow cut reserves for a second month.
The Taiwan dollar closed at NT$32.261 on the 6th, up 5.4 cents and at its strongest level in nearly three weeks, after two sessions of hot-money inflows pushed it past NT$32.4 and NT$32.3 and eased pressure on the NT$32.5 handle. Turnover in Taipei reached $3.1385 billion, while foreign buying in Taiwan equities followed a NT$90.31 billion spree on the 5th with a further NT$2.02 billion net purchase on the 6th, helping offset July's record $28 billion in foreign remittances that contributed to a second straight monthly drop in Taiwan's foreign exchange reserves (central bank-held foreign assets) to $594.27 billion. Taiwan's Central Bank said the currency is being driven by U.S. dollar moves and short-term portfolio flows, even as Bloomberg pointed to one-month non-deliverable forwards (offshore FX contracts settled in cash) and risk reversals (options pricing that signals bullish or bearish bias) as signs bearish positioning may be turning bullish. Dealers said the Taiwan dollar remains in a NT$32 to NT$32.5 range for now, with the U.S.-Iran situation, foreign inflows and this week's U.S. non-farm payrolls report likely to shape whether it tests NT$32.2 or rebounds with the dollar.