The TWD strengthened by around 0.4% against the US dollar in November. However, as Taiwan’s growth of export orders is set to decline, economists at MUFG Bank expect the USD/TWD pair to advance nicely through the next year.

Depreciation bias for TWD against USD till end of 2022

“For the medium term, we expect Taiwan’s exports growth to be on a trend decline till the end of 2022. Further decline in semi-conductor prices would add pressure on the nominal value of exports as well.” 

“China, one of Taiwan’s major exports destination, will experience a sizable GDP growth deceleration from this year’s around 8% YoY growth to about 5-5.5% YoY in 2022, which would imply a much weaker incremental demand for Taiwan goods in 2022.” 

“Other factors, including higher US rates, stronger Taiwan capital outflow as more of Taiwan’s insurance allocate to US assets, would also add pressure on TWD.”