TWD: Consolidating vs USD with Upside Risks – Commerzbank

Commerzbank analysts Henry Hao and Charlie Lay believe the New Taiwan dollar is currently consolidating against the US dollar, but the fundamental backdrop provides upside support. They note that Taiwan's booming AI-related export sector and its large external surplus form a solid floor for the TWD, implying risks of further strength.

**AI export dividend builds a moat for the currency**

Against the backdrop of surging global AI demand, Taiwan's role as a key hub for semiconductors and AI servers keeps its exports robust. This generates sizable and stable trade surpluses, translating directly into market demand for the TWD. The analysts stress that this structural advantage gives the currency strong resilience against USD fluctuations—even with the dollar index trading near 99.14, the TWD can maintain a relatively stable consolidation rather than weakening unilaterally.

**External surplus provides a fundamental anchor**

Beyond export momentum, Taiwan's persistently large external surplus is a core factor underpinning the currency. A sustained surplus means ample FX supply, limiting the TWD's downside. Commerzbank argues that any pullback driven by short-term capital flows or a dollar rebound would likely represent a fundamental-supported correction, not a trend reversal. Market participants are closely watching global tech sentiment and Fed policy direction to gauge whether the TWD can break out of its recent range.

**Upside risks warrant attention**

Despite the current consolidation, analysts explicitly flag upside risks. If global risk appetite improves or the dollar comes under further pressure, the TWD could be the first to stage a breakout given its strong fundamentals. Investors should note that the current consolidation may be a period of accumulation ahead of a new round of repricing.