New Taiwan Dollar breaks the 30 mark! A comprehensive analysis of the USD's future decade trend and exchange rate investment opportunities

The New Taiwan Dollar (NTD) has skyrocketed nearly 10% within just two trading days, marking the largest single-day gain in 40 years. What investment opportunities are hidden behind this strong surge? How will the US dollar’s trend evolve over the next decade? This article provides an in-depth analysis of exchange rate drivers and offers investment strategies to help you seize the opportunities brought by this currency fluctuation.

NTD Unusual Surge: From Depreciation Panic to a 5% Single-Day Rally

In just 30 days, market sentiment has undergone a 180-degree reversal. A month ago, concerns were mounting that the NTD might break below 34 or even 35 against the US dollar. Who would have thought that now the NTD would break through the important psychological threshold of 30?

The early May rally was indeed astonishing: on May 2, the NTD surged 5% against the dollar in a single day, setting a 40-year record for the largest single-day increase, closing at 31.064. After the weekend market closure, on May 5, the NTD continued to rise by 4.92%, even breaking the 30 mark intraday, reaching a high of 29.59, triggering the third-largest trading volume in forex market history.

In other words, in just two trading days, the appreciation totaled nearly 10%, a phenomenon unique among Asian currencies. During the same period, the Japanese yen, Korean won, and Singapore dollar also appreciated, with gains of about 1.5%, 3.8%, and 1.41%, respectively, but none as aggressive as the NTD.

It is worth noting that from the beginning of the year until early April, before the US policy announcements, the NTD was still depreciating by about 1%. The rapid and intense turnaround clearly indicates a fundamental change in market expectations.

Deep Analysis of the Three Major Drivers Behind the NTD Surge

Institutional Hedging Operations as the Behind-the-Scenes Driver

According to the latest UBS research report, this abnormal volatility has exceeded what traditional economic indicators can explain. The key factor is the large-scale forex hedging and position unwinding by Taiwanese insurers and corporations.

Taiwan’s life insurance sector holds up to US$1.7 trillion in overseas assets, mainly US Treasuries. However, for a long time, these institutions lacked sufficient forex hedging measures—mainly because the central bank had historically been able to effectively suppress sharp NTD appreciation. Now, that assumption has been broken, forcing these institutions to adjust passively.

UBS warns that when the NTD retraces, insurers and exporters may further increase their hedging ratios. Restoring forex hedging to trend levels alone could trigger about US$100 billion in dollar selling pressure, equivalent to 14% of Taiwan’s GDP. This potential risk warrants close attention.

Trade Policy Expectations and New Capital Inflows

The announcement of US tariff policies acted as a catalyst. When markets anticipated that the government would delay implementing reciprocal tariffs by 90 days, two major expectations emerged:

First, a global procurement wave is expected, benefiting Taiwan as an important export base in the short term. Second, international organizations have raised Taiwan’s economic growth forecasts, and with Taiwan’s stock market performing well, these positive news have led to a frenzy of foreign capital inflows.

It should be noted that Taiwan’s trade surplus in the first quarter reached US$23.57 billion, up 23% year-on-year, with the external surplus soaring 134% to US$22.09 billion. Such a large trade surplus itself provides strong support for the new Taiwan dollar.

Market Expectations Due to Limited Central Bank Policy Space

The US government’s “Fair and Reciprocal Trade” plan explicitly emphasizes “currency intervention” as a key review point. This has raised concerns in the market that, under the US-Taiwan negotiation context, the central bank may find it difficult to intervene strongly in the forex market as in the past.

This concern is not unfounded. The central bank faces a dilemma: excessive intervention could be accused by the US of “currency manipulation,” but no intervention might lead to rapid NTD appreciation, impacting exports. Under this constraint, market expectations are that the central bank’s intervention will weaken significantly, further fueling the appreciation of the NTD.

The US Dollar’s Future Decade and Reasonable Exchange Rate Assessment

Will the NTD continue to appreciate? This requires multi-dimensional analysis.

Signals from Valuation Models

An important indicator of currency valuation is the Real Effective Exchange Rate (REER) compiled by the Bank for International Settlements (BIS). The index is normalized to 100; values above 100 indicate overvaluation, below 100 suggest undervaluation.

As of the end of March, the US dollar index was around 113, indicating a significant overvaluation, while the NTD index remained around 96, in a reasonably undervalued zone. UBS’s valuation model further shows that the NTD has shifted from moderate undervaluation to a fair value that is 2.7 standard deviations higher, implying that the room for further appreciation is gradually narrowing.

( Longer-Term Perspective: Year-to-Date Cumulative Appreciation

If we extend the observation period from recent abnormal fluctuations to the year-to-date, the appreciation of the NTD is roughly in line with regional currencies:

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

Although the NTD has appreciated rapidly recently, from a longer-term perspective, its trend is synchronized with regional currencies. This suggests that the appreciation is not an anomaly but part of a collective regional currency appreciation trend.

) Institutional Expectations and Derivatives Market Signals

The forex derivatives market shows the “strongest appreciation expectation in five years.” Based on historical experience, similar large single-day surges often do not immediately reverse. Most industry insiders believe that it is unlikely for the NTD to rise to 28 against the dollar, but once it breaks 30, it may oscillate within the 29.5–30.5 range.

The official tolerance limit is roughly around a 3% increase in Taiwan’s trade-weighted index. Approaching this level, the central bank may increase intervention efforts to stabilize volatility.

Lessons from the Past: The US Dollar’s Outlook for the Next Decade

To understand the future, look at the past. The USD/TWD exchange rate over the last decade has experienced multiple cycles.

2014 to mid-2018: US began slowing down QE, initiating a tightening cycle, and the TWD started to strengthen.

2018 to early 2020: US rate hikes, dollar strengthened, exchange rate stabilized around 32–33.

2020 to early 2022: US Fed’s balance sheet expanded from US$4.5 trillion to US$9 trillion, rates fell to zero, dollar depreciated, and the TWD hit a historic low of 27.

2022 to present: US inflation spiraled out of control, the Fed raised rates sharply, the dollar rebounded, and the exchange rate returned to around 32. Only after the Fed ended its high-rate cycle and began cutting rates in September 2024 did the rate drift back above 30.

From this decade-long review, it’s clear that: The USD/TWD has oscillated between 27 and 34, with a volatility of about 23%, relatively moderate compared to other global currencies. The yen’s fluctuation reached 50% (99–161), twice that of the TWD.

The TWD’s small interest rate swings mean that its appreciation or depreciation mainly depends on Fed policy. Over the next ten years, key variables influencing the USD trend include: the duration of the Fed’s rate cut cycle, US fiscal deficits, and global capital flows.

Investment Strategies: Three Approaches for Different Investors

( Aggressive Investors: Short-term Trading to Capture Volatility

If you have forex trading experience and high risk tolerance, you can participate directly in USD/TWD or related currency pairs for short-term trading, capturing daily or intraday swings. If you hold USD assets, you can also use forward contracts and other derivatives to lock in appreciation gains.

The key is to set strict stop-loss points and avoid over-leverage. Many forex platforms offer demo accounts; it’s recommended to test your strategies with simulated trades first.

) Moderate Investors: Low Leverage + Portfolio Diversification

For investors wanting to participate but with stronger risk awareness, it’s advisable to use low leverage for USD/TWD and keep forex positions within 5–10% of total assets. The remaining funds should be diversified into other global assets such as Taiwanese stocks, bonds, and other currency pairs. This way, even if exchange rates fluctuate significantly, the overall risk remains manageable.

Always monitor Taiwan’s central bank moves and US-Taiwan trade developments, as these will directly impact exchange rate trends.

Conservative Investors: Historical Reference Points + Long-term Holding

If you prefer long-term investment over short-term trading, you can refer to the “most common yardstick” in the market:

• Below 1:30: Most believe the dollar is relatively cheap; consider gradually building USD positions.
• Above 1:32: Consider gradually reducing holdings or locking in gains.
• Between 30–31: This may become a normal range in the future, suitable for routine currency exchanges.

Taiwan’s economic fundamentals remain solid, with robust semiconductor exports. The long-term trend suggests the NTD will stay relatively strong. Slow appreciation within the 30–30.5 range may become normal, but the probability of sharp volatility has significantly decreased.

Summary: Core Points to Seize the NTD Appreciation Opportunity

This surge in the NTD is not a fleeting phenomenon but the beginning of a structural adjustment. Institutional hedging, trade expectations, and policy anticipations are jointly pushing the NTD higher. However, the appreciation potential has shrunk from “infinite” to “limited.”

The USD’s trend over the next decade depends on Fed policy cycles. With the Fed entering a rate-cut phase, the NTD’s appreciation trend may continue, but the magnitude will be moderate. The extreme scenario of below 28 is unlikely, and prolonged oscillation in the 29.5–30.5 range is more probable.

For investors, the key is to choose strategies aligned with their risk tolerance: aggressive traders can capture short-term swings; moderate investors can use low leverage; conservative investors can wait for buying points below 30. Regardless of the approach, always remember the three disciplines: “control leverage, set stop-losses, diversify risks.”