New Taiwan Dollar breaks through the 30 mark! Master the 10-year pattern of USD exchange rate trends, the complete guide to investment planning in 2025

Lessons from History: A 10-Year Review of USD/NTD Trends

Before delving into the recent appreciation of the New Taiwan Dollar, let’s first look at the exchange rate trajectory over the past decade (October 2014 to October 2024). During this period, USD/NTD traded within a range of 27 to 34, with an amplitude of about 23%. In comparison, the traditional safe-haven currency, the Japanese Yen, fluctuated over 50% (from 99 to 161 against USD). The stability of the NTD is actually quite impressive.

The main driver of the NTD’s fluctuations is not Taiwan’s central bank actively controlling the currency, but rather the monetary policy of the Federal Reserve. Between 2015 and 2018, influenced by Chinese stock market volatility and the European debt crisis, the Fed maintained an accommodative stance, leading to a strengthening of the NTD. After 2018, as the US rate hike cycle began, the exchange rate faced pressure. However, when the pandemic hit in 2020, the Fed’s balance sheet surged from $4.5 trillion to $9 trillion, interest rates fell near zero, the USD depreciated, and the NTD soared to a historic high of 27 per USD.

Starting in 2022, the Fed launched aggressive rate hikes to combat inflation, causing the USD to appreciate again, with the exchange rate hovering around 30. It wasn’t until September 2024, when the Fed began cutting rates, that the NTD’s upward trend became more pronounced.

Recent Dramatic Change: Why Did the New Taiwan Dollar Surge Nearly 10% in a Single Month?

Let’s go back to early May 2025. Just a month prior, the market was worried that the NTD might depreciate past 34 or even 35. But the situation took a sharp turn. On May 2, the NTD against USD surged 5% in one day, marking the largest single-day gain in 40 years, closing at 31.064, a 15-month high. After the weekend, on May 5, the rally continued, rising another 4.92%, with intraday lows touching 29.59. In just two trading days, the NTD appreciated nearly 10%, triggering the third-largest trading volume in foreign exchange history.

What triggered this surge? And why was the magnitude so astonishing?

Trump Tariff Policies Ignited the Rally

The announcement that the US President would delay implementing reciprocal tariffs for 90 days immediately created two expectations: first, global buyers anticipated front-loading orders before tariffs took effect, benefiting Taiwan as a major export nation; second, the International Monetary Fund(IMF) unexpectedly raised Taiwan’s economic growth forecast, coupled with steady Taiwan stock market performance, leading to a flood of foreign capital into NTD assets, forming the first wave of appreciation momentum.

Central Bank Policy Dilemma Sparks Concerns

On May 2, the central bank issued a statement but avoided addressing the most pressing issue: whether Taiwan-US negotiations involved exchange rate clauses. The central bank attributed the volatility to “market expectations of possible US pressure to appreciate the currency,” adopting a vague stance. Meanwhile, the Trump administration’s “Fair and Reciprocal Trade” plan explicitly listed “currency intervention” as a review item, heightening market fears that the central bank might not intervene as forcefully as before.

Data shows Taiwan’s first-quarter trade surplus reached $23.57 billion, up 23% year-on-year, with the US surplus soaring 134% to $22.09 billion. Once the central bank withdraws, the upward pressure on the NTD will be substantial.

Financial Industry’s Concentrated Hedging Intensifies Volatility

UBS(UBS)'s latest report points out that a 5% single-day increase exceeds the explanation scope of traditional economic models. What’s the real driver? Concentrated hedging operations by Taiwan’s life insurance companies. Taiwan’s life insurers hold $1.7 trillion in overseas assets (mainly US Treasuries) but lack currency hedging for the long term. Historically, the central bank could effectively suppress NTD appreciation, but now it faces a dilemma—worried that intervention might be blacklisted as currency manipulation by the US. This structural risk explosion has led to USD selling pressure exceeding $100 billion (about 14% of Taiwan’s GDP).

Central Bank Governor Yang Jinlong later rebutted, stating that life insurers had not significantly increased operations, but market doubts remain.

USD/NTD Trend: Will It Continue to Rise?

Investors are eager to know—does the NTD still have room to appreciate? Can it reach 28?

Short-term Difficulty Breaking the 28-Level

Although market expectations suggest US pressure might push the NTD higher, industry insiders generally believe that the probability of the NTD reaching 28 per USD is very low. The central bank’s tolerance for appreciation is limited; if the trade-weighted index rises another 3%, official intervention will likely intensify.

Using REER Index to Assess Fair Value

The key indicator for whether the exchange rate is reasonable is the real effective exchange rate index(REER) compiled by the Bank for International Settlements(BIS). An index of 100 indicates equilibrium; above 100 suggests overvaluation, below 100 indicates undervaluation.

As of end-March data:

• USD REER index around 113 → Overvalued
• NTD REER index around 96 → Fairly undervalued
• Yen and Korean Won indices at 73 and 89 respectively → Asian currencies generally undervalued

Comparing with Other Asian Currencies

If we extend the observation period from recent abnormal volatility to the beginning of the year, the appreciation of the NTD isn’t particularly remarkable:

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

Everyone is appreciating; the NTD is not unique.

UBS Forecast: The Uptrend Is Not Over

By integrating valuation models, forex derivatives markets, and historical experience, UBS believes the NTD’s appreciation will continue:

• Valuation models show the NTD has shifted from undervaluation to about 2.7 standard deviations above fair value;
• Forex derivatives market shows the “strongest appreciation expectation in 5 years”;
• Historical experience indicates that large single-day gains are usually not followed by immediate sharp reversals. UBS advises investors not to prematurely reverse positions but notes that if the trade-weighted index rises another 3% (approaching the central bank’s tolerance limit), official intervention will likely increase.

Investment Strategies to Capture Volatility Opportunities

Recommendations for different investors:

Forex Traders

Can directly trade USD/NTD or related currency pairs on forex platforms to capture intraday or short-term fluctuations; if holding USD assets, use forward contracts or derivatives to lock in appreciation gains.

Conservative Strategies for Beginners

Remember these three principles: first, test with small amounts; second, choose beginner-friendly platforms like Mitrade for small short-term experiments; third, set stop-loss points to protect capital. It’s advisable to start with demo accounts to test strategies, monitor the central bank’s moves, and observe US-Taiwan trade developments, as these factors will directly influence the future trend.

Long-term Investment Planning

Taiwan’s economic fundamentals are solid, with strong semiconductor exports. The NTD may oscillate within 30 to 30.5, maintaining relative strength. However, forex positions should be limited to 5%-10% of total assets, with remaining funds diversified into global assets to reduce risk.

It is recommended to operate USD/NTD with low leverage, earn steady forex gains, and combine with Taiwan stocks or bonds to build a more balanced portfolio. Remember the market consensus: below 30 USD per NTD is generally a buy point, above 32 is a sell point, serving as a long-term reference for forex investments.

Regardless of the strategy chosen, regularly monitor the 10-year cyclical patterns of USD exchange rates, combined with central bank signals and economic fundamentals, to profit steadily amid volatility.