The New Taiwan Dollar significantly appreciated last Friday (2nd), peaking at 30.77 against the US Dollar, marking an increase of 1.247, and closing at 31.064, up by 9.53 cents, setting a new record. The Central Bank stated that the appreciation was driven by market expectations and inflows into the stock market. The Financial Times suggested that this rapid rise of the New Taiwan Dollar may be linked to the hedging activities of life insurance companies, highlighting the difficult position the Taiwan Central Bank faces.

The Central Bank cited media reports indicating that the US government might demand currency appreciation from major trading partners during tariff negotiations, leading to expectations for the New Taiwan Dollar's appreciation in the domestic foreign exchange market. Additionally, foreign investors recorded a substantial net buying of NT$42.924 billion in the Taipei stock market, which increased the supply of US dollars and facilitated the appreciation of the New Taiwan Dollar.

According to a Financial Times column, Taiwan's life insurance industry holds US$1.7 trillion in overseas assets, mostly in US bonds, becoming a regional financial power but also facing structural weaknesses due to increased risk exposure. Life insurance companies holding long-term dollar-denominated assets without effective hedging have created a mismatch risk between New Taiwan dollar liabilities and dollar-denominated assets.

The column further explained that while similar scenarios can be observed in other Asian countries, the scale of Taiwan's risk exposure is significantly higher than that of Japan. Unless life insurance companies are allowed to borrow large sums from the Central Bank, these risk issues may not be alleviated. The article warns that if the New Taiwan Dollar continues to appreciate significantly, the financial structure of Taiwan's life insurance industry may be severely impacted.

The Financial Times speculated that one of the reasons for the recent sharp appreciation of the New Taiwan Dollar might be the rush of life insurance companies seeking to hedge. It also noted a similar surge in the Korean Won, suggesting that some life insurance companies may be shifting to using the Korean Won as a substitute hedging tool due to high dollar hedging costs. The Financial Times also highlighted that the Taiwan Central Bank is currently in a difficult situation as they observe currency appreciations in various countries, where the Central Bank can opt to print money to suppress strong trends. However, with the US Treasury closely monitoring interventions, any actions taken at this time could provoke the United States.