The Taiwan dollar experienced significant volatility, surging over 2% and reaching 29.16 per U.S. dollar, marking the largest one-day gain since early May. This increase reflects a 12% gain for the year, making it Asia's top-performing currency. Factors influencing this rise included large foreign inflows and aggressive dollar sales by local exporters. The central bank intervened to manage currency strength amidst pressures related to trade surpluses and repatriation from Taiwanese corporations, particularly affecting life insurance companies.
"The Taiwan dollar has been under strong appreciation pressure due to record trade surpluses, equity inflows, and hedging activity by Taiwan life insurance companies," Khoon Goh, head of Asia research at ANZ, wrote in a note.
"State banks bought the greenback to smooth market liquidity," they said.
Authorities are eager to prevent a sharp appreciation to ease the pressure on life insurers after a jump in exports amid the trade war triggered a wave of repatriation by Taiwan's corporates.
The currency jumped as much as 2.5% to 29.16 per U.S. dollar Tuesday in the biggest one-day gain since early May.
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