Taiwan dollar craters ahead of Nancy Pelosi's visit amid heightened US-China tensions
Saul Loeb/AFP via Getty Images
- The Taiwan dollar hit a two-year low ahead of Nancy Pelosi's visit to Asia and amid US-China geopolitical tensions.
- On Sunday, it dipped below the symbolic threshold of 30 Taiwan dollars per 1 US dollar, though it regained some of its losses.
- House Speaker Nancy Pelosi is planning to visit Taiwan this week, according to a Wall Street Journal report.
The Taiwan dollar moved to its lowest point since June 2020, slipping past a key symbolic threshold of 30 per US dollar ahead of Nancy Pelosi's visit to Asia.
The currency dropped Sunday as much as 0.2%, with sentiment turning lower due to heightened geopolitical tensions between China and the US. Taiwan's currency may be weighed down as the market prices in Pelosi's potential visit to the Southeast Asian island, which China sees as part of its territory.
On Monday, the Taiwan dollar retraced some losses and now hovers just above the 30-per-1 US dollar mark.
Pelosi is planning to visit Taiwan, as well as Japan, South Korea, and Malaysia.
The currency's weakness also comes from downbeat economic data from China, which reported sluggish manufacturing data this week. The Caixin/Markit manufacturing purchasing managers' index dropped to 50.4 in July, down from 51.7 the month before and well below expectations.
There could still be room to fall for the Taiwan dollar. Its one-month implied volatility has jumped over the last several days after hitting a five-month low early last week, per Bloomberg data.
"The underperformance in the Taiwan dollar is reflecting heightened geopolitical risk, rather than fundamentals," Frances Cheung, a strategist at Oversea-Chinese Banking Corp. in Singapore told Bloomberg. "Unfortunately this kind of sentiment appears to be self-fulfilling in that the resulting equity outflows are putting pressure on the local currency."