## Will the New Taiwan Dollar Exchange Rate Break Through 31.3? Capital Reflow and Weakening US Dollar Are Key Drivers

Market signals indicate a turning point. As Federal Reserve officials' dovish stance becomes increasingly clear, expectations for a rate cut in December are rising. The US dollar index has retreated from its previous high and is currently hovering around 100.16. This change injects vitality into emerging Asian markets, and the Taiwan dollar exchange rate has also risen accordingly, reaching a high of 31.405 early in the session, an increase of 4.2 cents, sparking lively discussions about capital reflow.

**Time Window for US Dollar Weakening**

The Federal Reserve's policy shift is the trigger for this wave. After the market digests the rate cut signals, the attractiveness of the US dollar diminishes significantly. Meanwhile, major Asian currencies such as the Japanese Yen and Korean Won are also rebounding simultaneously, indicating that this is not an isolated phenomenon for the Taiwan dollar but a regional characteristic across Asia.

**Dual Drivers of Taiwan Stock Market and Exporters**

This week, Taiwan stocks performed remarkably well, led by electronic blue-chip stocks, driving the broader market higher. As the month-end approaches, exporters' currency conversion demands have surged, creating a pattern of simultaneous stock and currency appreciation. The Taiwan dollar opened at 31.42 early in the session and quickly surged to 31.405, demonstrating clear strength in appreciation. This synchronized stock and currency rally often signals active capital flows.

**Limited Room for Further Appreciation**

Although the Taiwan dollar has performed impressively, market participants caution against excessive optimism. The US dollar index still firmly remains above 100, reflecting the resilience of the global dollar landscape. This factor is constraining the appreciation potential of Asian currencies. The Taiwan dollar is currently fluctuating around 31.415. Whether it can further appreciate depends on the continued net inflow of foreign capital and the stability of the US dollar trend.

**Market Outlook and Investment Advice**

Analysts suggest that if the two supporting forces for the Taiwan dollar—namely, a weakening US dollar and sustained net inflows into the stock market—can be maintained, the Taiwan dollar may challenge the psychological barrier of 31.3. However, given the many variables in the international currency markets and the influence of China's economic conditions on regional exchange rates, it is advisable for exporters to consider timely currency conversion and locking in profits around 31.4. Importers, on the other hand, can patiently wait for potential retracement opportunities before re-entering, which is a prudent approach.

The recent strength of the Taiwan dollar may just be the beginning; the true test will depend on subsequent actions by the Federal Reserve and the validation of global economic data.