## New Taiwan Dollar Depreciation Continues: The Truth Behind the 31.5 Defense Line Breach

How strong is the withdrawal force of foreign capital? Just look at the synchronized decline in Taipei's stock and foreign exchange markets today. The New Taiwan Dollar against the US dollar suddenly broke through the 31.5 mark in the afternoon, closing at 31.475, a depreciation of 9.5 cents, hitting a nearly seven-month low. Meanwhile, the Taiwan stock market plummeted over 500 points intraday, ending with a sharp drop of 330 points. The foreign capital selling pressure was astonishing—after selling NT$48.9 billion in the previous trading day, the selling pressure today showed no signs of easing. The dual decline in stocks and currencies vividly reflects this wave of capital outflow.

## Foreign Capital Withdrawal Is the Real Driving Force

Financial experts analyze that the key to this round of depreciation is not purely economic fundamentals, but rather a systematic retreat of foreign investors. When overseas funds withdraw massively, demand for the US dollar surges, naturally putting pressure on the New Taiwan Dollar. Today’s trading volume expanded to US$2.056 billion, reflecting increased market volatility.

Forex expert Li Qizhan believes that after losing the 31.5 mark, the New Taiwan Dollar will enter a short-term oscillation in a weak zone. If the Taiwan stock market drops another over 500 points tomorrow, the exchange rate may further depreciate to 31.6. There is still room for the New Taiwan Dollar to weaken before the end of the year, but the central bank’s regulatory red line is also part of the consideration—31.5 is a relatively satisfactory level for exporters and remains within the acceptable range for the central bank.

## International Turmoil Adds to Taiwan Dollar Burden

Under the dual pressures of geopolitical tensions and US economic data, the New Taiwan Dollar faces greater challenges. Concerns about the prospects of the AI industry have intensified, causing sharp fluctuations in US tech stocks, which in turn drag down related sectors in Taiwan. Meanwhile, with Christmas holidays approaching, foreign investors are gradually entering holiday mode, increasing the pressure of capital withdrawal and portfolio adjustments.

Not only is the New Taiwan Dollar under pressure, but the entire Asia-Pacific foreign exchange market is also in turmoil. The Korean won against the US dollar has been depreciating more sharply since December, approaching the psychological threshold of 1500 won, with a monthly decline possibly the worst since the 2008 financial crisis, prompting the South Korean government to hold emergency meetings to discuss countermeasures. Today, the US dollar index slightly retreated to around 98.2, while the RMB midpoint rate slightly rose.

## Market Outlook: US Economic Data as a Key Variable

Market focus has shifted to a series of upcoming US economic data releases, which will be crucial for the Federal Reserve’s assessment of whether to cut interest rates next year, directly affecting global capital flows. Over the past two trading days, the Taiwan stock market has already fallen more than 660 points, with stocks and currencies both hitting bottom, intensifying market caution.

In the short term, as long as foreign investors continue to withdraw from Taiwan stocks, the New Taiwan Dollar will likely face further depreciation pressure. However, comparing other exchange rates such as the New Zealand dollar against the Taiwan Dollar, the collective weakening of Asian currencies reflects a global capital reallocation trend rather than issues specific to individual economies. Investors should closely monitor foreign capital flows and Federal Reserve policy signals to grasp the market’s future direction.