Markets globally are cautiously awaiting the speech of US Federal Reserve Chairman Jerome Powell at the annual central bankers' conference in Jackson Hole on August 22nd, amidst rising uncertainty surrounding US monetary policy and trade tensions.

In this context, Taiwan's financial markets saw mixed trends on August 18th. Taiwan's stock market opened lower then rose, while the Taiwanese dollar continued its decline against the US dollar, closing at its lowest level in three months at 30.056 TWD per USD, a drop of 4.6 cents.

Recent remarks by US President Donald Trump regarding potential tariffs on semiconductor chips of up to 200% or 300% have influenced sentiment, although the market interpreted these remarks as more of an intimidation tactic than actual policy. This market hesitancy reflects investors' willingness to wait for clarifications on US economic policies before making investment decisions.

Key Indicators

Strong Signal: Taiwanese Dollar stalls as markets await Fed remarks and US tariff details.
Leading Indicators: Decline of the Taiwanese Dollar to a three-month low, mixed stock market trading, and lower trading volumes in the forex market.

Regional Perspective

The Taiwanese Dollar has been negatively impacted by the global economic uncertainty, particularly concerning potential US tariffs on the technology sector. While Trump's comments may aim to pressure companies, the potential implications for global supply chains and the semiconductor industry, where Taiwan is a key player, are causing investor concern. The absence of significant intervention from the Central Bank of Taiwan suggests a willingness to let the market adjust its pricing naturally, putting additional pressure on the Taiwanese Dollar.

Analysis

The stability of the Taiwanese Dollar within the 29.9-30.1 TWD per USD range, with slight variations in forward exchange contracts, suggests that the market anticipates relative stability in the short term, with a slight leaning towards caution against a decline. The low trading volume indicates that market participants are adopting a wait-and-see approach, focusing on upcoming economic data, especially Powell's speech. The Federal Reserve's decision on interest rate cuts in September, along with developments in US-China trade negotiations, is likely to significantly influence the trajectory of the Taiwanese Dollar and other Asian currencies. Even with interest rate cuts, the US dollar index is expected to decline gradually, which could offer some support to non-US currencies.