Taiwan Dollar appreciates past the psychological barrier of 30! 2025 USD to TWD trend analysis and investment opportunity insights

How to View the Surge in the New Taiwan Dollar’s Appreciation?

The recent performance of the New Taiwan Dollar (NTD) has indeed been surprising. In just two trading days, it appreciated nearly 10%. On May 2nd, it surged 5% in a single day, marking the largest increase in 40 years. On May 5th, it broke through the 30-dollar mark, with an intraday high of 29.59. Such a rally is unprecedented among Asian currencies — compared to the Singapore dollar’s 1.41% increase, the Japanese yen’s 1.5%, and the Korean won’s 3.8%, the speed and strength of the NTD’s appreciation are clearly exceptional.

Compared to the intense volatility of the past month, market sentiment has undergone a complete reversal. Back in early April, investors were worried that the NTD might break below 34 or even 35 yuan per dollar. Now, they are celebrating breaking through 30 yuan. What exactly has happened behind this shift? Will the NTD continue to appreciate? What opportunities and risks does this appreciation bring to investors?

Three Core Drivers Behind the NTD’s Appreciation

First Layer: US Policy Shift Ignites Market Expectations

The Trump administration announced a 90-day delay in implementing reciprocal tariffs. This decision sparked two major market imaginations: first, global companies might accelerate procurement of Taiwanese goods to beat the tariffs, benefiting Taiwan’s exports; second, the International Monetary Fund (IMF) immediately raised Taiwan’s economic growth forecast, and Taiwan’s stock market performed remarkably well. These positive news flows attracted a large influx of foreign capital, becoming the initial push for the NTD’s appreciation.

Second Layer: Limited Policy Space for the Central Bank

Taiwan’s central bank faces a delicate dilemma. On one hand, Trump’s “Fair and Reciprocal Trade Policy” explicitly emphasizes “currency intervention” as a key review point. On the other hand, Taiwan’s trade surplus with the US hit a record high (a 134% surge to USD 22.09 billion in Q1), making it difficult for the central bank to intervene aggressively as before. Without approval, direct intervention risks being labeled as currency manipulation; but if the bank allows the NTD to appreciate freely, it could distort the economic structure.

Third Layer: Chain Reactions in Financial Institutions Amplify Volatility

UBS’s latest research indicates that the 5% single-day rise on May 2nd already exceeds typical economic indicator explanations. What is the real driver? Large-scale currency hedging operations by Taiwanese life insurers and export companies. Reports suggest Taiwanese life insurers hold up to USD 1.7 trillion in overseas assets (mainly US Treasuries). Previously, they relied on the central bank’s suppression of the NTD to naturally hedge. Now, with limited central bank action, these institutions are forced into a “panic” sell-off of US dollars. Just restoring hedging levels to historical norms could generate about USD 100 billion in dollar selling pressure, equivalent to 14% of Taiwan’s GDP.

Will the NTD Continue to Appreciate? Future Outlook Based on Multiple Indicators

Valuation Indicators

The Bank for International Settlements (BIS) compiled the Real Effective Exchange Rate (REER), an important tool for assessing currency valuation, with 100 as the equilibrium baseline. As of the end of March:

• US Dollar Index: about 113 → significantly overvalued
• NTD Index: about 96 → relatively undervalued
• Yen Index: only 73, Won Index: 89 → major Asian export currencies are generally undervalued

This suggests the NTD still has room to appreciate. But where is the theoretical upper limit? UBS’s valuation model shows the NTD has shifted from moderate undervaluation to a fair value that is 2.7 standard deviations higher. If it rises another 3% (close to the central bank’s tolerance limit), official intervention may intensify.

Is 28 Yuan a Psychological Limit?

Most industry insiders believe that the possibility of the NTD reaching 28 yuan per USD is very slim. The market generally considers 30 yuan as the new psychological support level. In the long term, the NTD is expected to fluctuate within the 30 to 30.5 yuan range.

Comparative Perspective: The NTD Isn’t That Special

If we extend the observation window from the recent abnormal volatility to the beginning of the year, a fascinating phenomenon emerges:

• NTD appreciated by 8.74%
• JPY appreciated by 8.47%
• KRW appreciated by 7.17%

Everyone has been rising. Although the recent appreciation rate of the NTD is the fastest, its overall trend aligns with regional currencies, showing no extraordinary divergence.

Signals from Derivatives Markets

Foreign exchange derivatives markets indicate the “strongest appreciation expectation in five years.” Historical experience suggests that after similar large single-day increases, immediate reversals are unlikely. This reflects strong market confidence in the NTD’s medium-term appreciation.

The Economic Logic Behind the NTD’s Appreciation: Why Is the Volatility So Intense?

As a typical export-driven economy, Taiwan’s net foreign investment accounts for about 165% of GDP, making its economy highly sensitive to exchange rate fluctuations. In other words, the NTD’s movements can trigger widespread reactions; any policy change can easily cause overreactions.

Looking back over the past decade (October 2014 to October 2024), the USD/NTD exchange rate has fluctuated between 27 and 34, with a volatility of about 23%. In comparison, the JPY/USD has ranged from 99 to 161, with a volatility of 50%, twice that of the NTD. This indicates that the NTD has been relatively stable among global currencies, but recent sharp fluctuations are indeed rare.

A Decade in Review: Understanding the True Drivers of the NTD’s Rise and Fall

Who Decides the NTD’s Trend?

An often-overlooked fact: the main determinant of the NTD’s movement is not Taiwan’s central bank but the US Federal Reserve. Since the NTD interest rate changes are small, its appreciation or depreciation mainly depends on US monetary policy.

• Between 2015 and 2018, amid the European debt crisis and Chinese stock market crash, the Fed slowed down quantitative tightening (QT) and even resumed quantitative easing (QE), strengthening the NTD.
• After 2018, as the Fed believed the economy was improving, it started raising interest rates and preparing to shrink its balance sheet.
• During the COVID-19 pandemic in 2020, the Fed doubled its balance sheet from USD 4.5 trillion to USD 9 trillion, with rates at zero, leading to dollar depreciation and the NTD rising to 27 per USD.
• From 2022 onwards, US inflation spiraled out of control, prompting the Fed to rapidly hike interest rates, causing the dollar to surge and the NTD to fall from 27 to around 33.
• Only after the Fed ended its high-interest cycle and started cutting rates in September 2024 did the exchange rate reverse back to around 32.

Practical Strategies for Investing in the NTD’s Appreciation

For Advanced Traders

If you have forex trading experience and high risk tolerance, consider two approaches:

1. Directly trade USD/TWD or related currency pairs on forex platforms to capture short-term or intraday fluctuations.
2. If you hold USD assets, hedge via forward contracts or other derivatives to lock in gains from NTD appreciation.

A Friendly Reminder for Beginners

Want to chase short-term volatility? Remember three principles: first, start with small capital to test the waters; second, keep a stable mindset—losing everything in one trade can end your trading journey; third, choose platforms suitable for small trades and practice gradually.

For Long-term Investors

Taiwan’s economic fundamentals are solid, with booming semiconductor exports. The NTD should remain relatively strong in the long run. It is recommended to keep forex exposure at 5%-10% of total assets, with the rest diversified into global assets to reduce risk.

Use low leverage when trading USD/TWD, and always set stop-loss points for self-protection. Many platforms offer demo accounts—new traders should test strategies there first. Keep a close eye on Taiwan’s central bank policies and US-Taiwan trade developments, as these directly influence exchange rates. Additionally, holding Taiwanese stocks or bonds can help stabilize your overall portfolio despite currency fluctuations.

To earn steady forex gains, avoid putting all eggs in one basket—diversification is the key to long-term success.

Market Consensus: The Significance of 30 Yuan

After a decade of market testing, most investors have an intangible “ruler” — 30 yuan. Generally, they consider USD/NTD below 30 as a buy signal and above 32 as a sell. For long-term currency investment, this can serve as a reference anchor.