Taipei: There is no room for the Taiwan dollar to rise to NT$28 against the greenback, despite the U.S. dollar index (DXY) recently slipping below the 100 mark, a foreign exchange analyst has stated. This development has sparked concerns over a potential currency war.

According to Focus Taiwan, after U.S. President Donald Trump announced high "reciprocal" tariffs on April 2 against countries with large trade surpluses with the U.S., including Taiwan, the DXY fell by nearly 3 percent in just 24 hours to 101.27, subsequently dropping below 100 as global markets reacted to the tariffs. In Asia, by the end of April, the Japanese yen had strengthened nearly 10 percent against the U.S. dollar, the Korean won surged 3.61 percent, and the Taiwan dollar increased by 2.39 percent.

A foreign exchange analyst, speaking to CNA on condition of anonymity, highlighted that Taiwan's central bank had not received any request from the U.S. Treasury Department to push for an appreciation of the Taiwan dollar as of May 1. The market does not appear to be set for such a rise. Although Taiwan's central bank can intervene in the currency exchange rate, such actions are not openly acknowledged, especially since Taiwan was placed on the U.S. Treasury Department's currency "watch list" for the sixth consecutive time last November.

The listing is based on criteria from the Omnibus Trade and Competitiveness Act of 1988, which evaluates the foreign exchange practices of the U.S.' major trading partners. The criteria include a bilateral trade surplus of at least US$15 billion with the U.S., a material current account surplus of at least 3 percent of GDP, and evidence of persistent, one-sided foreign exchange intervention. Taiwan currently meets the first two criteria, suggesting it is likely to remain on the watch list, as per the central bank.

The analyst mentioned that until the next semiannual report from the Treasury Department is released, Taiwan's central bank will remain cautious about any intervention to stabilize the local currency exchange rate. The Taiwan dollar has experienced a sharp rise recently, amid expected U.S. pressure for currency appreciation. On Monday morning, the Taiwan dollar traded at NT$29.675 against the greenback, up NT$1.389 from the previous close. Last Friday, it rose NT$0.953, or 3.07 percent, to NT$31.064, its highest level since January 9, 2024.

While Trump might push Taiwan for further currency appreciation, there is no consensus in the foreign exchange market on how high it might rise against the U.S. dollar, given Trump's unpredictability, the analyst noted. However, the analyst expressed that "there is no room for appreciation to NT$28.00" against the U.S. currency.

Chen Yu-chung, a foreign exchange analyst at Taishin International Bank, commented that Taiwan had previously experienced an outflow of hot money due to uncertainty surrounding Trump's aggressive tariff policy. Chen noted that trade tensions have somewhat eased since Trump announced on April 9 a 90-day pause on his "reciprocal" tariffs, while maintaining a baseline universal tariff of 10 percent for most countries, except China. Consequently, the greenback has been sliding, Taiwan's stocks have rebounded, and foreign investors have turned to net buying, which has helped boost the Taiwan dollar. However, market concerns about the ongoing tariff war and a potential currency war remain, he added.