Improving the competitive edge of Taiwanese exporters in the global market has offset the adverse impact of a stronger New Taiwan dollar against the US dollar, the central bank said in a report on Thursday.
Many Taiwanese firms, particularly in the semiconductor industry, have invested significantly in advanced processes to meet global demand for emerging technologies, making them more competitive, the central bank said.
Despite the NT dollar’s sharp appreciation last month, strong demand for artificial intelligence (AI) applications and rush orders from foreign buyers to avoid tariffs by US President Donald Trump’s administration pushed up exports by 32.3 percent.
Photo: Ritchie B. Tongo, EPA-EFE
This year, the NT dollar has risen against the US dollar by more than 11 percent. Last month, the local currency soared NT$2.088, or nearly 7 percent, against the greenback.
The central bank said it jumped into the market to shore up the US dollar and prevent the NT dollar from rising further, but denied the US had pressured Taiwan for a stronger local currency while Taipei and Washington were in talks about tariffs.
The appreciation of the NT dollar continued this month, as conflict in the Middle East escalates. Earlier last week, the local currency hit NT$29.460 at one point, the highest in more than three years.
A rising NT dollar cuts both ways: The appreciation is expected to result in foreign exchange losses for exporters, but it would lower costs for companies that need to buy equipment or raw materials overseas, the central bank said.
After a survey on how local enterprises reduce foreign exchange losses, the central bank found that many companies engaged in hedging practices, including “natural hedging.”
A common natural hedging method is to match revenues and expenses or invoices in the local currency, it said.
Many Taiwanese exporters have also adjusted their production and sales models, the central bank said.
In the short term, they raised product prices and cut orders on products with lower gross margins, but they are keen to increase value-added products and diversify their product portfolios in the long run, it said.
The central bank said it would continue its efforts to maintain order in the foreign exchange market and ensure that the NT dollar moves in a dynamic equilibrium.
Central bank Governor Yang Chin-long (楊金龍) on Thursday told reporters that the strength of the NT dollar this year remained acceptable, adding that with Taiwan’s economic growth expected to slow down and US tariff policies likely to become clearer in the second half of the year, the appreciation of the local currency could moderate accordingly.
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