New Taiwan Dollar breaks the 30 mark! How to evaluate the future trend of USD to TWD? A must-read guide for investors in 2025

The Economic Logic Behind Exchange Rate Fluctuations

The recent strength of the New Taiwan Dollar (NTD) has attracted market attention. In just two trading days, the USD/NTD exchange rate experienced an astonishing nearly 10% decline, which is rare among Asian currencies. In comparison, the Japanese Yen appreciated by only 1.5%, the Korean Won by 3.8%, and the Singapore Dollar by 1.41%. The pace of NTD appreciation clearly outpaces these, reflecting specific economic drivers at play.

This upward trend is not without clues. The market generally attributes it to expectations of adjustments in US tariff policies. When the Trump administration announced delays in implementing equivalent tariffs, global exporters rushed to make bulk purchases before the policies took effect. Taiwan, as a major exporter of electronics and semiconductors, directly benefited from this demand surge. The IMF also upwardly revised Taiwan’s full-year economic growth forecast, further boosting foreign investor optimism, leading to a flood of capital inflows that pushed up the NTD.

Central Bank Dilemma and Market Expectations

Taiwan’s central bank faces a delicate choice during this period. On one hand, the rapid decline of the USD/NTD exchange rate triggers risk aversion among foreign investors and local businesses; on the other hand, US Treasury’s review of currency manipulators limits the central bank’s intervention space. This dilemma has triggered chain reactions in financial markets.

Taiwan’s insurance industry holds large overseas assets (mainly in US bonds), traditionally relying on the central bank to keep the NTD’s exchange rate low to maintain effective hedging. However, as concerns about international scrutiny intensify, insurers are forced to accelerate hedging operations. This “panic hedging” behavior actually further drives the NTD’s appreciation, creating a self-reinforcing market cycle.

Judging the Fair Value of USD/NTD

Based on the BIS(BIS) real effective exchange rate index(REER), the current USD index is around 113, indicating a significant overvaluation; meanwhile, the NTD index remains around 96, in a reasonably undervalued range. This suggests that the NTD still has room to appreciate, but the upward potential should be limited.

Compared to other major Asian currencies during the same period, the NTD’s appreciation rate has approached the annual average. From the start of the year to now, the cumulative gains are: NTD +8.74%, JPY +8.47%, KRW +7.17%. The performance of these currencies is roughly synchronized. This indicates that recent sharp NTD surges may have already reflected most of the expected appreciation.

Three Key Points to Watch for Future Trends

Realistic Limits to Appreciation

Most industry analysts believe that the probability of the NTD reaching 28 per USD is very low. The market generally considers that if the trade-weighted index of the NTD rises by about 3% (approaching the central bank’s tolerance limit), official interventions are likely to intensify to stabilize the currency.

Forward Market Signals

The foreign exchange options market shows “the strongest appreciation expectations in five years,” reflecting market participants’ optimistic outlook for the NTD’s medium-term trend. However, historical experience suggests that after such large single-day gains, the currency often enters a consolidation phase rather than continuing a straight upward trajectory.

Central Bank Policy Constraints

Although the market expects further NTD appreciation, the central bank’s willingness to intervene and international pressures set a ceiling. If the appreciation threatens export competitiveness or causes excessive capital inflows, the central bank will inevitably take measures to dampen volatility.

Investor Strategies

Conservative Investors

For long-term asset allocation, it’s advisable to incorporate USD/NTD volatility into overall risk management. Taiwan’s economic fundamentals remain solid, with strong semiconductor exports. The NTD may find a new equilibrium around 30 to 30.5. However, FX positions should be limited to 5%-10% of total assets to avoid overconcentration. Diversifying with Taiwanese stocks or bonds can effectively reduce the impact of exchange rate fluctuations on the overall portfolio.

Trading-Oriented Investors

Short-term traders can capitalize on USD/NTD swings over days to weeks. Use low leverage and set clear stop-loss points to control risk. Forward contracts and other derivatives can lock in appreciation gains but require careful assessment of hedging costs.

Risks for Beginners

New investors interested in participating in this currency movement should start with small amounts to familiarize themselves with the market. Avoid impulsive additions. Demo trading platforms offer low-cost practice opportunities to test strategies. The key is to develop disciplined trading habits, including setting stop-losses and managing single-trade risks.

Lessons from a Decade of Exchange Rate Volatility

Looking back over the past ten years(2014-2024), the USD/NTD exchange rate has fluctuated between 27 and 34, with a volatility of about 23%. In comparison, the JPY exchange rate has experienced a 50% fluctuation (from 99 to 161), highlighting Taiwan’s relative stability.

This stability stems from several factors. The Taiwan central bank’s policy actions are relatively restrained, with small interest rate changes; meanwhile, the USD/NTD trend is mainly driven by Federal Reserve policies. Between 2015 and 2018, the Fed’s easing cycle boosted the NTD; after 2018, rate hikes strengthened the dollar; the extreme easing during the COVID-19 pandemic pushed the NTD to 27; and after 2022, aggressive Fed rate hikes brought the USD/NTD back to around 32.

Until September 2024, when the Fed began a rate-cutting cycle, the USD/NTD exchange rate experienced a new adjustment. The recent rapid appreciation essentially reflects market expectations shift regarding the long-term dollar trend and a reassessment of Taiwan’s export outlook.

Practical Recommendations Summary

For investors wanting to participate in USD/NTD exchange rate opportunities, focus on these points:

First, central bank actions and developments in US-Taiwan trade negotiations are the primary variables influencing the exchange rate, so continuous monitoring is essential. Second, align personal risk tolerance and investment horizon—fundamentals for long-term investing, technicals and sentiment for short-term trading. Lastly, always prioritize risk control—avoid chasing highs or operating against the trend.

Historical data over ten years shows that 1 USD = 30 TWD has become a key psychological threshold—most investors see below 30 as a buy point and above 32 as a sell point. This “market ruler” can serve as a reference for long-term FX investment but should not be an absolute entry or exit signal. Markets constantly adjust between expectations and reality; smart investors learn to find opportunities within this volatility rather than be overwhelmed by it.