NTD appreciates and breaks through the 30-dollar mark! USD to TWD trend analysis and 2025 investment outlook

The New Taiwan Dollar (NTD) is experiencing an astonishing appreciation trend! Recently, the NTD has undergone rare and intense fluctuations not seen in decades, soaring nearly 10% within just two trading days. Although most Asian currencies have generally strengthened following U.S. President Trump’s announcement of tariff policy adjustments, the magnitude of the NTD’s appreciation stands out in Asia. Whether this wave of appreciation can continue, and the future direction of the NTD against the USD, have become key concerns for investors.

NTD Breaks 30 Barrier! From Depreciation Fears to Single-Day Skyrocketing

Looking back a month ago, the market was worried that the NTD might break below 34 or even 35 against the dollar. Who would have thought that just 30 days later, market sentiment would undergo a dramatic reversal?

Under the impact of U.S. tariff policies, the recent surge of the NTD has been remarkable. On May 2nd, the USD/TWD exchange rate skyrocketed 5% in a single day, marking the largest single-day surge in 40 years, closing at 31.064, and rewriting a 15-month high record. After the weekend closure, on May 5th, the NTD continued to rise by 4.92%, breaking the psychologically important 30 mark during intraday trading, reaching a high of 29.59.

In just two trading days, the NTD has skyrocketed nearly 10%, setting multiple historical records and triggering the third-largest trading volume ever in the FX market. Notably, from the beginning of this year until April 2nd, before Trump announced the reciprocal tariffs, the NTD was still in a slight depreciation of about 1%.

The U.S. tariff negotiations have boosted Asian currencies, including the Chinese Renminbi, Hong Kong Dollar, Japanese Yen, and Singapore Dollar, all performing well against the USD. The Singapore Dollar appreciated by 1.41%, the Yen by 1.5%, and the Korean Won by an even larger 3.8%. However, the appreciation of the NTD is particularly distinctive among Asian currencies.

Taiwan, as a typical export-oriented economy with a net investment scale accounting for 165% of GDP, is highly sensitive to exchange rate fluctuations. The recent abnormal appreciation of the NTD has sparked market panic, prompting high-level government officials to issue statements to calm the market.

Will the NTD Continue to Appreciate or Depreciate? Analyzing Three Key Factors

Factor 1: The Trigger of Trump’s Tariff Policies

The market generally believes that the recent skyrocketing of the NTD was triggered by the Trump administration’s tariff policy adjustments. When Trump announced a 90-day delay in implementing reciprocal tariffs, two major expectations emerged:

• A wave of centralized procurement worldwide, which could benefit Taiwan’s exports in the short term and provide strong support for the NTD exchange rate.
• The International Monetary Fund (IMF) unexpectedly raised Taiwan’s economic growth forecast, coupled with a stellar performance of the Taiwan stock market.

These positive news items drove foreign capital to flood in, becoming the main driving force behind the NTD’s appreciation.

( Factor 2: Central Bank Facing Policy Dilemma

On May 2nd, the day the NTD appreciated sharply, the central bank issued an emergency statement with some reservations:

• Attributing the exchange rate fluctuations to “market expectations that trade partners’ currencies may appreciate against the U.S. dollar.”
• Not directly responding to concerns about whether the U.S.-Taiwan tariff negotiations involve exchange rate clauses.

In fact, the U.S. government’s “Fair and Reciprocal Trade” plan explicitly emphasizes “currency intervention” as a focus of scrutiny. Against this background, the central bank may find it difficult to intervene strongly in the FX market as it did in the past.

Taiwan’s trade surplus in Q1 reached USD 23.57 billion, up 23% year-over-year, with the US trade surplus soaring 134% to USD 22.09 billion. Without central bank intervention, the appreciation of the NTD will face significant pressure.

) Factor 3: Financial Sector Hedging Amplifies Volatility

UBS’s latest research report states that the abnormal fluctuations of the NTD have already exceeded the scope explainable by traditional economic indicators.

The report analyzes that, besides market sentiment factors, large-scale FX hedging operations by Taiwanese insurers and corporations, as well as concentrated unwinding of NTD financing arbitrage trades, have collectively caused this exchange rate movement. UBS warns that when the NTD pulls back, insurers and exporters may further increase hedging ratios. Simply restoring FX hedging/deposits to trend levels could trigger USD selling pressure of about USD 1 trillion, equivalent to 14% of Taiwan’s GDP.

Future Outlook for USD/TWD Exchange Rate

Appreciation Potential

Currently, the market generally expects the Trump administration to continue pressuring the NTD to appreciate, but the specific extent remains uncertain. Most industry insiders believe that the likelihood of the NTD reaching 28 per USD is very low, with limited upside potential.

REER Index and Exchange Rate Fairness

An important indicator for assessing exchange rate fairness is the Real Effective Exchange Rate (REER) index compiled by the Bank for International Settlements (BIS). The index is normalized at 100; above 100 indicates overvaluation, below 100 indicates undervaluation risk.

As of the end of March, BIS’s REER data shows:

• The USD index is around 113 → indicating a clear overvaluation
• The NTD index remains around 96 → fairly undervalued

The currencies of major Asian export countries are even more undervalued, with the Yen and Won indices at 73 and 89, respectively.

Comparison with Asian Currencies

If we extend the observation period from the recent abnormal one-month fluctuations to the period since the start of the year, we find that the appreciation of the NTD is roughly in line with the Yen and Won:

• NTD up 8.74%
• Yen up 8.47%
• Won up 7.17%

Everyone is appreciating. Although the NTD has experienced rapid appreciation recently, over a longer-term perspective, its trend remains synchronized with regional currencies.

UBS Report Highlights

Despite the astonishing recent appreciation, multiple indicators suggest the NTD will continue to appreciate:

• Valuation models show the NTD has shifted from moderate undervaluation to a fair value that is 2.7 standard deviations higher.
• FX derivatives markets show the “strongest appreciation expectation in five years.”
• Historical experience indicates that large single-day surges of this magnitude often do not immediately reverse.

UBS advises investors not to prematurely take contrarian positions, but expects that when the trade-weighted index of the NTD rises by another 3% (approaching the central bank’s tolerance limit), official interventions may intensify to stabilize the exchange rate.

How to Capitalize on the NTD Appreciation Opportunity

( FX Trading Strategies

For experienced forex traders, engaging in short-term trading of USD/TWD or related currency pairs can seize opportunities brought by short-term fluctuations. If you already hold USD assets, using derivatives like forward contracts to hedge and lock in the appreciation gains is advisable.

) Principles for Beginners

New investors aiming to catch recent volatility should remember these principles: start with small amounts to test the waters, avoid impulsively adding positions. Small-scale short-term trading of popular currency pairs can be used to practice strategies.

( Long-term Investment Recommendations

Given Taiwan’s solid economic fundamentals and booming semiconductor exports, the long-term trend of appreciation or depreciation of the NTD warrants attention. It is expected that the NTD will oscillate between 30 and 30.5, maintaining a relatively strong position in the long run. However, long-term forex positions should be controlled within 5%-10% of total assets, with the rest diversified into other global assets to manage risk.

For steady forex gains, it is recommended to operate with low leverage on USD/TWD and always set stop-loss points for protection. Many FX platforms offer demo trading accounts—use them to practice and test your strategies.

) Key Monitoring Points

Always keep a close eye on the actions of the Taiwan Central Bank and the latest developments in U.S.-Taiwan trade, as these directly influence the exchange rate. Diversify your investments; don’t put all eggs in one basket—consider adding some Taiwan stocks or bonds to your portfolio to reduce overall risk amid currency fluctuations.

Historical Review: 10-Year USD/TWD Trend

Over the past decade (October 2014 to October 2024), the USD/TWD exchange rate fluctuated between 27 and 34, with a volatility of 23%, relatively small compared to global currencies.

In contrast, the historically safe-haven Yen experienced a volatility of up to 50% (99–161 against USD), twice that of the TWD. The TWD’s rate movements have mainly been influenced by the US Federal Reserve’s (Fed) rate hikes and cuts, given its relatively small interest rate swings.

From 2015 to 2018, China’s stock market crashes and the European debt crisis broke out. The Fed slowed its balance sheet reduction and continued quantitative easing, which led to a strengthening of the TWD. After 2018, as the Fed raised interest rates and the COVID-19 pandemic erupted in 2020, the Fed expanded its balance sheet by about double in a short period.

Between 2020 and 2022, the US balance sheet increased from USD 4.5 trillion to USD 9 trillion, with interest rates dropping to zero. This caused a turning point in USD appreciation/depreciation, and the TWD soared, reaching a rate where 27 TWD could buy 1 USD.

However, after 2022, due to runaway US inflation, the Fed rapidly raised interest rates, causing the USD to skyrocket and fluctuate within a narrow range around 27. The Fed’s three rounds of quantitative easing after the 2008 financial crisis (QE) and subsequent tapering in December 2013 led to rising US interest rates, capital flowing back to the US, and the USD/TWD rising from lows of 2013 to 33.

Until September 2024, when the Fed ended its high-interest cycle and began rate cuts, the exchange rate remained around 32.

( Investment Reference Points

Overall, over the past decade, the USD/TWD has experienced multiple fluctuations. The primary determinants of the rate are the US Federal Reserve’s rate policies, not the Taiwan Central Bank’s. However, the market’s “most common perception” is that 30 is a key psychological level.

Most people believe that USD below 30 can be bought, while above 32 should be sold. For long-term FX investment, this can serve as a reference point.