Hot Money Continues to Flow Out Ahead of US CPI Release; Taiwan Dollar Falls for 5th Day to Near 2-Month Low

(Central News Agency, Taipei, June 10) The United States is about to release its May Consumer Price Index (CPI). If inflation heats up, it could strengthen market expectations for a Federal Reserve interest rate hike. Ahead of this key data release, foreign investors continued to adjust their positions, heavily selling Taiwan stocks and repatriating funds, causing both the stock and currency markets to fall. The New Taiwan Dollar closed at NT$31.668 against the US dollar, down NT$0.05, marking a new low in nearly two months.

The market is also weighing the latest developments in tensions between the US and Iran, keeping risk aversion high. Additionally, the US CPI data to be released tonight is the most anticipated key indicator before the Fed's interest rate decision meeting next week. Amidst pervasive external uncertainty, the financial market atmosphere has become markedly more cautious.

Following a renewed sell-off in US tech stocks, the Taiwan stock market also came under pressure, plunging in the afternoon session. The TAIEX closed at its lowest point of the day, falling 147.90 points to 43,225.54, breaching its monthly moving average of approximately 43,349 points. This marked the sixth-largest closing point drop in history.

Foreign investors sold a net NT$93.574 billion worth of Taiwan stocks today, the eighth-largest single-day net sell-off in history. Foreign investors have now sold Taiwan stocks for five consecutive sessions, with cumulative net selling exceeding NT$430 billion.

The New Taiwan Dollar opened at NT$31.63 against the US dollar today. Due to the massive accumulated demand for fund repatriation from foreign investors' consecutive days of selling, the exchange rate continued to weaken, hitting a low of NT$31.698 during the session. It eventually closed at NT$31.668, marking its fifth consecutive day of depreciation. The total trading volume in the Taipei and Yuanta foreign exchange markets remained high, reaching US$3.699 billion.

A foreign exchange trader pointed out that the trend of foreign investors adjusting their Taiwan stock positions has been evident in recent days, with daily net sell-offs almost all exceeding NT$90 billion. The large-scale fund repatriation in the forex market is difficult to stem, even with active dollar selling by exporters and increased intervention by the central bank to slow the depreciation.

"The upcoming US CPI is very important," the trader said, adding that if the data shows inflation is heating up, the market will reassess the Fed's rate path, and there could be further room for correction in the stock market. As foreign investors continue to adjust their Taiwan stock holdings, the New Taiwan Dollar will likely continue its depreciation trend.

However, the trader noted that despite the downward pressure on the Taiwan dollar from the falling stock market and capital outflows, there is significant dollar-selling demand from exporters above, and the central bank is not keen on seeing an excessive depreciation of the Taiwan dollar, as it could worsen imported inflation pressure. Supported by these two factors, the Taiwan dollar is unlikely to depreciate sharply but will likely maintain a range-bound, weak bias. (Editor: Yang Lanxuan) 1150610