The New Taiwan Dollar has strongly broken through the 30 yuan integer barrier! What is the outlook for the USD/TWD exchange rate in 2025?

The New Taiwan Dollar has recently experienced a “roller coaster” market. In just two trading days, it surged nearly 10%, breaking through the psychological barrier of 30 yuan and hitting the largest single-day gain in 40 years, igniting the entire foreign exchange market. From worrying about devaluation just a month ago to now becoming the most appreciated currency among Asian currencies, this intense volatility has left investors both excited and confused. Is this a fleeting phenomenon or the beginning of a new trend? Let’s analyze in depth.

Why Did the Taiwan Dollar Suddenly Take Off? Three Major Drivers Unveiled

Trump’s tariff policy is the strongest trigger

After U.S. President Trump announced a 90-day delay in implementing reciprocal tariffs, two forces immediately pushed the New Taiwan Dollar higher:

First, global buyers began to rush in, expecting Taiwan, as a major export country, to benefit in the short term, leading to a frenzy of foreign capital inflows. Second, the International Monetary Fund unexpectedly raised Taiwan’s economic growth forecast, coupled with stellar performance in the Taiwan stock market, creating strong support for the currency.

The data is quite astonishing—on May 2, the New Taiwan Dollar surged 5% in a single day, closing at 31.064 yuan, setting a 15-month high. On May 5, it continued to rise by 4.92%, with intraday trading briefly breaking below 29.59 yuan, and forex trading volume hitting the third-largest scale in history.

The Central Bank Faces a Dilemma—Unable to Intervene as Before

The central bank governor emphasized in an emergency statement that there was no intervention in the forex market, but the key question is—why not intervene?

The Trump administration’s “Fair and Reciprocal Trade Plan” explicitly lists “currency intervention” as a focus of review. If Taiwan’s central bank were to strongly suppress the appreciation like in the past, it could be labeled as a currency manipulator. Under this political pressure, the central bank’s hands are tied.

Looking at trade data, the pressure is indeed immense—Taiwan’s first-quarter trade surplus reached US$23.57 billion, up 23% year-on-year, with the U.S. surplus soaring 134% to US$22.09 billion. Without the protection of central bank intervention, the New Taiwan Dollar faces enormous upward pressure, which is inevitable.

Financial institutions’ “Panic Operations” Amplify Volatility

UBS’s latest report presents a startling analysis—Taiwan’s life insurance industry holds overseas assets totaling up to US$1.7 trillion (mainly U.S. Treasury bonds), but in the past, they lacked sufficient currency hedging measures because they believed the central bank would suppress the currency’s appreciation.

When signals emerged that the central bank “might be unable to intervene,” these insurers hurried to hedge their positions. Large-scale forex hedging operations by insurers and exporters, along with concentrated unwinding of New Taiwan Dollar financing arbitrage trades, collectively triggered this move. UBS warns that restoring hedging scales to trend levels could trigger about US$100 billion in dollar selling pressure, equivalent to 14% of Taiwan’s GDP.

Will the New Taiwan Dollar Continue to Appreciate? Four Key Indicators Tell You the Answer

The 28 Yuan Level Is Nearly Impossible to Break

Although the recent rally has been fierce, most industry insiders believe that the possibility of the New Taiwan Dollar reaching 28 yuan per USD is extremely low. Appreciation potential exists, but there are limits.

Assessing Rationality Using the BIS Index

The real effective exchange rate index (REER) is based on 100—above 100 indicates overvaluation, below 100 suggests undervaluation. As of the end of March:

• U.S. dollar index about 113 → clearly overvalued
• New Taiwan Dollar index around 96 → reasonably undervalued

In comparison, currencies of major Asian export countries are more significantly undervalued, with the Japanese Yen and Korean Won indices at 73 and 89 respectively. The Taiwan Dollar still has room to appreciate.

Comparing Other Asian Currencies’ Trends

Extending the observation period from the beginning of the year to now, the appreciation of the New Taiwan Dollar is actually in sync with neighboring currencies:

• TWD up 8.74%
• JPY up 8.47%
• KRW up 7.17%

While the appreciation looks remarkable, in the context of the entire Asian currency appreciation wave, it’s not particularly outstanding. This also reflects that the TWD’s movement is aligned with regional currencies’ overall performance.

UBS Forecast: The Appreciation Trend Will Continue

According to UBS’s latest analysis, multiple indicators suggest the TWD’s appreciation trend will persist:

First, valuation models show the TWD has shifted from moderate undervaluation to a fair value that is 2.7 standard deviations higher. Second, the forex derivatives market indicates the “strongest appreciation expectation in five years.” Furthermore, historical experience shows that after similar large single-day gains, immediate retracement is unlikely.

UBS advises investors not to prematurely take contrarian positions, but expects that when the trade-weighted index of the TWD rises another 3% (approaching the central bank’s tolerance limit), the authorities may step up intervention to smooth volatility.

A Decade of TWD Movements: Key Investment Reference Points

Reviewing data from October 2014 to October 2024, the USD/TWD exchange rate has fluctuated between 27 and 34, a 23% range, which is relatively low volatility among global currencies.

In contrast, the Japanese Yen, considered a safe-haven currency, has a volatility of up to 50% (ranging from 99 to 161), twice that of the TWD! The TWD’s interest rate fluctuations are small, and its ups and downs are mainly dictated by the Federal Reserve.

Three Key Historical Moments:

• 2015-2018: During China’s stock market crash and European debt crisis, the Fed slowed down QT and began easing, leading to a strengthening TWD.
• Post-2018: The Fed started raising interest rates, but during the COVID-19 pandemic in 2020, the Fed’s balance sheet expanded rapidly from US$4.5 trillion to US$9 trillion, with rates dropping to zero, and the TWD soared to 27 per USD.
• After 2022: Due to runaway U.S. inflation, the Fed aggressively raised rates, causing the dollar to surge, with the exchange rate rising back to around 32 and remaining volatile. It wasn’t until September 2024, when the Fed ended this high-rate cycle and began cutting rates, that the exchange rate returned to around 32.

How to Capture This Appreciation Opportunity? Investment Strategies

For experienced forex traders:

You can directly trade USD/NTD or related currency pairs in the forex market for short-term gains, capturing intraday or multi-day volatility. If you already hold USD assets, you can use derivatives like forward contracts to hedge and lock in the appreciation gains.

Three key tips for beginners:

1. Start with small amounts to test the waters—avoid impulsively increasing positions, as emotional trading can lead to losses. Some platforms offer small-scale short-term trading features suitable for beginners.
2. Be cautious during volatile periods; many platforms provide demo accounts—test your strategies in virtual environments first.
3. Always set stop-loss points to protect yourself—this is fundamental risk management.

Long-term investors’ advice:

Taiwan’s economic fundamentals remain solid, with booming semiconductor exports. The TWD is expected to stay relatively strong, oscillating around 30 to 30.5 yuan. But don’t put all your eggs in the currency basket—limit forex holdings to 5-10% of total assets, and diversify remaining investments across global stocks, bonds, and other assets to manage risk.

Using low leverage to trade USD/NTD is a relatively stable approach. Keep a close eye on Taiwan’s central bank moves and U.S.-Taiwan trade developments, as these will directly influence the exchange rate.

Multi-Currency Comparison: A Decade Review of the South African Rand against the USD

Expanding the view to emerging market currencies, the South African Rand’s USD trend over the past decade is also worth noting. Compared to the TWD, emerging market currencies tend to be more volatile, reflecting higher political and economic uncertainties. The TWD remains relatively stable among global currencies.

Conclusion: The Market’s “30 Yuan Level”

Over the past decade, a common “market yardstick” has emerged—the 30 yuan mark. Most investors believe that USD below 30 can be bought, above 32 should be sold. This can serve as an important reference point for long-term currency trading.

Currently, the TWD has broken through 30 yuan. The future trend will depend on close monitoring of the central bank’s actions, U.S.-Taiwan negotiations, and global economic policies. Short-term fluctuations are inevitable, but in the long run, the TWD still has fundamental support.