BofA’s Piron Says Won, Taiwan Dollar Offer Opportunity

BofA Global Research’s Claudio Piron sees opportunities to go long the Korean won and Taiwan dollar following an AI-driven selloff. He argues that strong current-account surpluses and continued export flows should support both currencies.

Analysis

Current-account support is a medium-term cushion, not a near-term floor: exporter receipts may be hedged or retained offshore, while risk-off positioning and a stronger dollar can dominate spot FX. The key distinction is exposure. KRW is likely the higher-beta expression of a regional cyclical recovery; TWD has tighter policy management and greater concentration in the semiconductor export cycle. A broad AI-equity drawdown could therefore pressure both currencies even if trade balances remain healthy.

Over the next 1–3 months, watch export orders, foreign equity flows, USD direction and central-bank tolerance for appreciation. Over 6–18 months, sustained AI hardware demand would reinforce Taiwan’s external flows, but concentration and geopolitical risk remain material. The contrarian risk is treating a surplus as a catalyst: without evidence of renewed portfolio inflows or export acceleration, the thesis may only limit downside rather than drive appreciation. A renewed dollar rally, weakening export data/current-account balances, or persistent foreign outflows would invalidate the entry case.

Key Decisions for Investors

• Consider a modest, staged long-KRW and long-TWD basket versus USD only after the selloff stabilizes; do not chase spot solely on the strategist’s view. Keep KRW exposure smaller if risk appetite remains weak.
• Prefer defined-risk option structures over unhedged positions if implied volatility and carry make them economical; verify those inputs before implementation. Avoid assuming TWD can appreciate freely given managed-float dynamics.
• Track monthly export and current-account data, foreign equity flows, and central-bank actions as the 1–3 month confirmation set. Reduce exposure if trade flows deteriorate or outflows persist despite calmer markets.
• Treat a broad USD rebound or renewed AI-sector de-rating as the principal near-term stop thesis; Taiwan geopolitical escalation is a separate tail risk that can overwhelm flow support.