Taiwan's dollar climbed to its strongest level in over a month, trading near 31.991 per US dollar, as foreign investors poured money into the island's technology shares, led by chip giant Taiwan Semiconductor Manufacturing Co (TSMC). The South Korean won also gained ground, with the region's tech-heavy stock markets rallying on sustained demand for artificial-intelligence chips.
The currency moves are a reminder that the AI boom is not just a stock-market story. When international investors buy shares in Taiwan or South Korea, they typically need to convert their money into the local currency, which pushes the exchange rate higher. That dynamic has been in full force recently, as global funds chase exposure to the companies that make the chips powering AI systems.
What's driving the inflows?
TSMC, the world's largest contract chipmaker, is a key supplier to major AI chip designers like Nvidia and AMD. Its shares have been a magnet for foreign investment, and those inflows have a direct effect on the Taiwan dollar. According to Reuters, TSMC-linked inflows were a primary factor behind the currency's strength.
Another supporting factor: the fading of dividend outflows. In Taiwan, many companies pay out dividends in the summer, and when foreign investors receive those payouts, they often convert them back into US dollars or other foreign currencies, which can weaken the local currency. As that seasonal pressure eases, the Taiwan dollar tends to firm up.
South Korea's won also benefited from a similar dynamic. The country's KOSPI index has been lifted by a rally in AI-related stocks, including memory chip makers like Samsung Electronics and SK Hynix, which supply high-bandwidth memory used in AI accelerators. That rally has attracted foreign capital, supporting the won.
What it means for investors
For everyday investors, the strength of Asian currencies is a signal that global money is flowing into the region's tech sector. That can be a positive for those who hold international funds or ETFs with exposure to Taiwanese and South Korean stocks. A stronger local currency can also boost the returns of foreign investors when they convert their gains back to their home currency.
However, currency strength can be a double-edged sword. For exporters in Taiwan and South Korea, a firmer local currency makes their goods more expensive overseas, which could weigh on future earnings. That's a factor to watch, especially for companies that rely heavily on exports.
The broader backdrop is also important. The recent rally in Asian stocks comes as US inflation data has cooled, raising hopes that the Federal Reserve may slow its pace of interest-rate hikes. That has weakened the US dollar broadly, giving emerging-market currencies room to appreciate. As we noted in our coverage of Asian stocks posting their best week in two months, the combination of easing inflation and strong tech earnings has been a tailwind for the region.
What to watch next
Investors will be keeping an eye on whether the AI-driven inflows continue. Any signs of a slowdown in AI spending or a pullback in tech earnings could quickly reverse the currency gains. Also, central bank policies in the region could play a role. If the Taiwan central bank or the Bank of Korea steps in to curb currency strength to protect exporters, that could limit further appreciation.
For now, the trend is clear: AI chip demand is not just boosting stock prices—it's also moving currencies. As long as global investors remain hungry for AI exposure, Taiwan and South Korea are likely to see continued foreign inflows, keeping their currencies supported.
For more on the regional tech rally, see our piece on the KOSPI's five-day winning streak. And for a broader view of currency moves, check out how the South African rand is also strengthening on different factors.
