Tue, Nov 04, 2025 page9

• Central bank faces tightrope to dodge ‘manipulator’ tag by US Treasury

  CURRENCY VALUATION: Heavy intervention early in the year leaves the central bank limited maneuvering room to avoid censure by the US Treasury Department

  • Bloomberg
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  The New Taiwan dollar’s rally is boxing in the central bank, leaving it with limited room to intervene to avoid a “currency manipulator” label from the US.

  Heavy intervention in the first half of the year leaves the central bank with a buffer of US$4.5 billion for the second half, Bloomberg said. That is based on US Department of the Treasury criteria that net purchases of foreign currency in interventions should be below 2 percent of GDP over 12 months.

  A smaller intervention cushion poses a challenge for the central bank, with the NT dollar forecast to rally further by about 2 percent this quarter as the artificial intelligence (AI) boom drives up demand for local semiconductors. Constraints on intervention would put investors on alert for abrupt moves such as the one in May when the local currency surged the most since the 1980s.

  

  NT$1,000 banknotes are pictured in Taipei on May 6.

  Photo: Bloomberg

  Breaching US Treasury criteria risks putting Taiwan in the crosshairs of US authorities and could lead to unfavorable outcomes for the nation in trade negotiations. Some analysts expect the central bank to use interventions sparingly into the end of the year.

  “Taiwan’s central bank would need to be more selective in when to step into the market and how much it intervenes to smooth out volatility,” Australia and New Zealand Banking Group Ltd head of Asia research Khoon Goh (吳昆) said. “As a result, we could see greater fluctuations in the Taiwan dollar for the rest of the year.”

  The NT dollar has risen more than 6 percent so far this year to 30.75 per US dollar, and a Bloomberg survey showed it might advance further to 30.2 this quarter. The central bank already bought US$13.25 billion of US currency to cap the local currency’s gains from January to June, the most for a half year period since 2020.

  Although its dollar purchases for the next US Treasury review that cover the 12 months through June are below the US threshold, the central bank would need to rein in further operations this year to avoid the manipulator label. The previous US report showed Taiwan on the list of countries that the US Treasury is closely monitoring.

  The US dollar’s decline this year amid US fiscal concerns is boosting major Asian currencies, providing another tailwind for the NT dollar.

  “Should Japanese yen and the Chinese yuan continue to strengthen, there could also be more room for Taiwan dollar to gain,” Malayan Banking Berhad senior foreign exchange analyst Fiona Lim said.

  One option for the central bank to avoid the ire of US authorities is to influence the exchange rate.

  In June, the central bank asked lenders to delay US dollar sales from exporters in a rare move, people familiar with the matter had said.

  Investors are likely to keep a close watch on Taiwan’s trade data on Friday after exports to the US rose sharply in September despite tariffs. Another stellar month would boost the market’s confidence in the local economy and lay the ground for a stronger NT dollar.

  “This makes the central bank’s job more challenging amid the presence of the Treasury Report, which acts as a hindrance to the [central bank’s] intervention efforts,” Lim said.
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