Taiwan Dollar Nears 33, Short-Term Weakness Unchanged
The Taiwan dollar against the U.S. dollar fell by more than 10 cents intraday on the 5th to 32.985, closing at 32.876, down 5.5 cents and approaching 33. Fubon Financial Holding Chief Economist Luo Wei said a rate at 32.9 to 33 was no surprise, mainly because market concerns over AI capital expenditure persist, foreign investors continued to sell Taiwan stocks and remit funds abroad, while the U.S. dollar index stayed relatively strong. He noted that until those concerns are removed, it will be hard to see foreign investors heavily adding to Taiwan stocks, the Taiwan dollar's weak bias will remain unchanged, though exporters selling dollars at highs and appropriate measures by the central bank could ease depreciation pressure.
Prolonged Regional Conflicts Lift Inflation and Policy Pressure
Luo Wei said that in 2027 the global economy, driven by geopolitical conflicts, major central bank policies and financial market volatility, is expected to maintain moderate expansion, but the prolonged Russia-Ukraine and Middle East conflicts are pushing up energy prices and upside inflation risks, leaving major central banks with limited room for policy adjustment. The U.S.-Iran conflict has led Iran to expand controls around the Strait of Hormuz, Red Sea shipping risks have risen, international oil prices have increased with more evident pressure on refined oil prices, capacity in some regions has been damaged, and Asian refinery output has been constrained by raw material shortages. Long-term sovereign bond yields in mature countries climbed to high levels in the third quarter, major central banks all stood pat in October, and rising energy prices add upside inflation risk in the fourth quarter, leaving central banks facing forced-tightening policy pressure before year-end.
Strong AI Capex, Higher Rates Add Financing Pressure
The AI industry remains a key driver supporting global investment and economic growth, with the market expecting cloud service providers' capital expenditure in 2027 to exceed 1.2 trillion dollars, even surpassing operating cash flow over the same period, increasing corporate bond issuance and overseas fundraising needs. But rising market rates have increased AI financing pressure, with spreads on some cloud service providers' corporate bonds gradually widening, reflecting market demands over financing scale, investment returns and credit risk. Luo Wei said that if AI investment can lift productivity, boost corporate revenue and drive the real economy, it will help sustain steady growth; conversely, if noise emerges in the outlook, capital expenditure slows or financing needs push up long-term rates, it could squeeze profits and investment appetite, while attention should be paid to the funding magnet effect of large technology companies' fundraising.
U.S. Debt Nears Ceiling, Depreciation Stokes Central Bank Rate Focus
After the 2026 U.S. midterm elections, changes in the political structure will shape 2027 budget and debt-ceiling discussions, with the risk of heightened conflict between the executive and legislative branches, making budget negotiations, government shutdowns and the debt ceiling test cases for financial markets. U.S. federal debt has exceeded 40 trillion dollars and is approaching the ceiling, and with higher spending and rising bond supply, term premia and long-term Treasury yields could be pushed higher. Luo Wei cautioned to watch key Middle East straits and the Russia-Ukraine situation, the Fed's policy framework and the BOJ's rate decision, the sustainability of AI spending, and U.S.-European political and fiscal risks. For the Taiwan dollar, depreciation adds imported inflation pressure, and together with the U.S.-Taiwan interest rate gap, the central bank must rethink monetary policy considerations, with policy expected to see some adjustment from the fourth quarter this year to early next year in a gradual and moderate manner.