New Taiwan Dollar breaks the 30 mark against the US Dollar! 2025 Exchange Rate Trend Analysis and Investment Strategies

The New Taiwan Dollar (NTD) has surged nearly 10% within just two trading days, successfully breaking through the psychological barrier of 30 yuan, marking a rare rally in recent years. From concerns weeks ago that the NTD might depreciate past 34 yuan, to a dramatic reversal within just 30 days, what economic factors are hidden behind this shift? How can investors seize the opportunity to exchange NTD for USD? This article will analyze the various factors influencing the NTD exchange rate, forecast the future trend of USD/NTD, and provide practical advice for investors with different risk preferences.

NTD’s Rapid Rise: From Depreciation Panic to Single-Day Surge

On May 2nd, a historic moment occurred for USD/NTD—the single-day increase of 5%, the largest in 40 years—closing at 31.064 yuan, rewriting a 15-month high. Shortly after, on May 5th, the NTD appreciated another 4.92%, with intraday reaching 29.59 yuan, breaking the crucial 30-yuan support level and attracting significant market attention.

This rapid appreciation is unique among Asian currencies. Meanwhile, other regional currencies performed relatively modestly—Singapore dollar up 1.41%, Japanese yen up 1.5%, Korean won up 3.8%. Only the NTD demonstrated extraordinary strength.

Notably, this rally broke long-term market expectations. From early January to early April, the NTD was still depreciating by about 1%. No one anticipated such a sharp shift in market sentiment in such a short period, even prompting responses from government officials and the central bank.

Three Core Factors Driving the NTD’s Surge

Trump’s Tariff Policies as a Trigger

The U.S. government announced a 90-day delay in implementing reciprocal tariffs, leading to two strong market expectations: first, a global procurement wave may commence, benefiting Taiwan as an important export base, providing solid support for the NTD; second, the International Monetary Fund (IMF) unexpectedly raised Taiwan’s economic growth forecast, coupled with impressive Taiwan stock market performance. These positive news items attracted large foreign capital inflows, becoming the main driver of the NTD’s appreciation.

The Central Bank Faces a Dilemma

On May 2nd, the central bank issued an emergency statement but avoided addressing key issues. It attributed currency fluctuations to “market expectations that the U.S. might pressure trade partners to appreciate their currencies,” but did not clarify whether U.S.-Taiwan negotiations involved exchange rate clauses.

In fact, the U.S. government’s “Fair and Reciprocal Trade Plan” has made “currency intervention” a review focus, raising concerns that the central bank may not be able to intervene as forcefully as before. Supporting this concern, Taiwan’s trade surplus in Q1 reached $23.57 billion, up 23% year-on-year, with the U.S. trade surplus soaring 134% to $22.09 billion. If the central bank finds it difficult to intervene, the upward pressure on the NTD will be enormous.

Chain reactions in financial markets intensify volatility

UBS’s latest research reveals structural factors behind the volatility. Beyond market sentiment, large-scale hedging operations by Taiwanese insurers and exporters, as well as concentrated unwinding of NTD financing arbitrage trades, jointly contributed to this exchange rate movement. UBS warns that when the NTD retraces, insurers and exporters may further increase hedging ratios, restoring foreign exchange hedging to historical levels, which could trigger over $1 trillion in USD selling pressure—equivalent to 14% of Taiwan’s GDP—posing significant risks.

Future Outlook for the NTD

Valuation Assessment

Most industry analysts believe that it is highly unlikely for the NTD to appreciate to 28 USD/NTD. The key indicator for assessing currency valuation—the Bank for International Settlements’ Real Effective Exchange Rate (REER)—provides important reference. As of the end of March:

• The USD index is around 113, indicating a significant overvaluation
• The NTD index remains around 96, in a reasonably undervalued position
• Major Asian export currencies are more undervalued, with JPY and KRW indices at 73 and 89 respectively

From the recent abnormal volatility back to the start of the year, the NTD’s appreciation has been roughly in line with regional currencies: NTD +8.74%, JPY +8.47%, KRW +7.17%. The differences are not substantial.

UBS’s Key Forecasts

Despite the recent fierce rally, multiple analyses suggest the appreciation trend will continue. Valuation models show the NTD has shifted from moderate undervaluation to a fair value exceeding the mean by 2.7 standard deviations; FX derivatives markets reflect the “strongest appreciation expectation in five years”; historical experience indicates that such large single-day jumps are unlikely to immediately reverse.

UBS advises investors to avoid premature counter-trades but expects that when the trade-weighted index of the NTD rises another 3% (approaching the central bank’s tolerance limit), authorities may step up interventions to stabilize volatility.

Strategies for Different Investors

For Experienced Forex Traders

You can directly trade USD/NTD or related currency pairs on forex platforms to seize opportunities within days or even intraday. If you hold USD assets, you can also lock in gains from NTD appreciation through derivatives like forward contracts.

For Novice Investors

The primary principle is to start small, avoid impulsive increases, and prevent emotional imbalance leading to losses. Practice trading strategies on demo accounts first, and only enter with low leverage after confirming feasibility. Always set stop-loss points to protect your interests, and closely monitor central bank actions and the latest U.S.-Taiwan trade developments, as these directly influence exchange rates.

For Long-term Investors

Considering Taiwan’s solid economic fundamentals and sustained semiconductor export strength, the NTD is expected to fluctuate within the 30 to 30.5 range, maintaining a relatively strong position long-term. It is advisable to limit foreign exchange holdings to 5%-10% of total assets, diversify remaining funds into other global assets to spread risk. Employ low leverage when trading USD/NTD for steady gains, and combine with investments in Taiwan stocks or bonds to enhance portfolio resilience.

A Historical Perspective: Ten Years of USD/NTD

Over the past decade (October 2014 to October 2024), the NTD/USD exchange rate fluctuated between 27 and 34, a 23% range, with relatively moderate volatility among global currencies. In comparison, the Japanese yen experienced a 50% fluctuation (from 99 to 161 USD/JPY), twice that of the NTD.

The NTD’s ups and downs have been mainly driven by Federal Reserve policies rather than central bank actions. Between 2015 and 2018, influenced by the European debt crisis, the Fed slowed its tightening and resumed easing, strengthening the NTD. After 2018, expectations of Fed rate hikes caused fluctuations. During the COVID-19 pandemic in 2020, the Fed’s balance sheet rapidly expanded from $4.5 trillion to $9 trillion, with rates dropping to zero, pushing the NTD to a recent low of around 27 USD/NTD.

Post-2022, due to runaway U.S. inflation, the Fed launched rapid rate hikes, strengthening the dollar, and the exchange rate remained within a narrow range until September 2024, when the Fed ended its rate hike cycle and began cutting rates, causing the NTD to rebound to around 32.

Investor Reference Points

Historical experience provides a “psychological level”—most investors consider USD below 30 a good buy, and above 32 a signal to consider selling. For long-term FX investments, this can serve as an important benchmark, but it is also crucial to stay updated on central bank policies and the latest geopolitical and economic developments.