Taiwan Central Bank Defends U.S. Dollar Dominance Amid Tariff Uncertainty

Taiwan’s central bank moved swiftly on Sunday to calm investor concerns surrounding the safety and liquidity of U.S. Treasury securities, reiterating its faith in U.S. government debt and the continued dominance of the U.S. dollar as the world’s primary reserve currency. The comments came in response to growing anxieties following U.S. President Donald Trump’s April 2 tariff announcement, which triggered significant volatility in global markets, including a sharp sell-off in U.S. Treasuries. Despite these developments, Taiwan’s monetary authority emphasized that U.S. debt remains a highly liquid and reliable investment vehicle widely favored by global investors.

Highlights:

• Taiwan central bank says U.S. public debt remains stable and liquid

• U.S. dollar still regarded as the top international reserve currency

• April 2 tariff shock led to market jitters but long-term fundamentals remain intact

• Taiwan reassures investors amid speculation on dollar’s safe-haven status

Dollar Strength Speculation Dismissed Amid FX Intervention Rumors

The central bank also addressed market speculation fueled by President Trump’s repeated complaints about the strength of the U.S. dollar, which many interpreted as a signal of Washington’s desire for currency depreciation. These comments, in conjunction with Taiwan dollar strength in recent weeks, have sparked rumors that the U.S. may be quietly pressuring Taipei to allow its currency to appreciate as part of broader tariff negotiations. Taiwan’s central bank firmly denied any such request from Washington, urging media outlets and financial commentators to refrain from fueling what it characterized as unfounded speculation in the foreign exchange markets.

Highlights:

• Trump’s remarks on strong dollar raise speculation of U.S. currency adjustment

• Taiwan dollar has surged on speculation of U.S. policy influence

• Central bank says no U.S. request to alter Taiwan dollar value

• Authorities warn media against contributing to currency speculation

$582.8 Billion in Forex Reserves Still U.S.-Centric, Says Central Bank

With over 80% of Taiwan’s $582.8 billion in foreign exchange reserves held in U.S. Treasury securities, the central bank’s credibility is directly linked to confidence in the U.S. financial system. The Sunday statement made clear that Taiwan sees no imminent risk to this structure. The bank highlighted the U.S. dollar’s liquidity and reliability as a store of value, asserting that there is no global momentum to dethrone it from its reserve currency status. The emphasis appeared aimed at reinforcing global investor sentiment in light of heightened trade tensions and ongoing debate about de-dollarization trends.

Highlights:

• 80% of Taiwan’s foreign reserves held in U.S. Treasuries

• Central bank asserts confidence in dollar’s long-term dominance

• Liquidity and store-of-value functions remain intact for U.S. debt

• Taiwan dismisses fears of reserve currency upheaval

Crackdown on Currency Speculation by Foreign Investors

In a further move to stabilize the Taiwan dollar, the central bank disclosed that recent inspections had identified instances where foreign investors transferred large sums into local currency deposit accounts under the pretense of investing in domestic equities. However, the funds were not used for securities investment, raising suspicions of exchange rate manipulation. The central bank warned that such practices would not be tolerated and reaffirmed regulatory guidelines requiring foreign investors to use remitted funds for the declared purpose of investing in Taiwan’s financial markets—not for speculative FX trading.

Highlights:

• Foreign investors found transferring funds without equity investment activity

• Central bank warns against using remitted funds for FX speculation

• Regulatory checks ensure declared investment intentions are fulfilled

• Effort to curb Taiwan dollar manipulation amid trade policy uncertainty

Taiwan Central Bank Reaffirms Confidence in US Dollar and Treasuries Amid Global Concerns

Taiwan’s central bank has issued a rare public clarification affirming the soundness of US government debt and the continued dominance of the US dollar as the leading reserve currency, despite recent volatility triggered by Donald Trump’s tariff rhetoric and related concerns about a devaluation agenda. The bank, which holds over $582 billion in forex reserves—80% in US Treasuries, emphasized the dollar’s liquidity and role as a store of value remain intact.

This statement helps stabilize global investor sentiment and refutes speculative narratives suggesting a diminished role for the dollar in international finance. The clarification also indirectly supports the integrity of the global risk-free rate benchmark and the ongoing appetite for Treasuries, despite mounting US deficit anxieties and political rhetoric on currency weakness.

Impact on Global & US Stock Markets:

• Investor Reassurance: A key institutional holder’s vote of confidence in Treasuries calms global debt markets, helping contain yields.

• Dollar Sentiment Steadies: Reduced fears of deliberate devaluation alleviate pressures on dollar-exposed portfolios and EM currencies.

• Risk-On Revival Possible: Easing debt fears may support a rebound in equities, especially rate-sensitive sectors like tech and REITs.

• Focus Returns to Fundamentals: Market attention may shift back to economic data and Fed policy signals, reducing overreaction to political noise.

Impact on Indian Stock Market:

• FII Sentiment Stabilized: Taiwan’s reassurance supports confidence in US-denominated assets, aiding foreign fund flows to emerging markets like India.

• Metal & Exporters Watch: Reduced devaluation risk in the dollar eases pressure on Indian exporters and global commodity-linked stocks.

• Banking & IT Support: Confidence in dollar liquidity may improve visibility on global tech budgets and offshore deals, benefiting Indian IT stocks.

Impact on Indian Rupee (INR):

• Downside Risk to Rupee Eases: Reduced speculation of a weaker dollar lowers upside risk in INR; supports rupee stability.

• Forex Market Calms: USD-INR pair may remain range-bound as global confidence in dollar assets improves.

• RBI Intervention Pressure Reduces: Stable USD sentiment may limit need for aggressive RBI forex operations in the short term.

Focus Points for Investors:

• Track Global Dollar Sentiment: USD dynamics remain key for equity flows, commodity prices, and rupee performance.

• Watch UST Yields: Re-anchoring of long-end US yields offers better clarity for interest-rate sensitive assets globally.

• Monitor Fed Commentary: Central bank policy path remains more influential than political trade rhetoric in shaping market direction.

• Favour Dollar-Stable Sectors: Focus on sectors like Indian IT, pharma, and large-cap banks with USD exposure or global client base.