New Taiwan Dollar breaks the psychological barrier of 30! 2025 USD exchange rate trend chart analysis and investment strategies

The New Taiwan Dollar Appreciates to 40-Year High, Market Sentiment Fluctuates Dramatically

Recently, the trend of the New Taiwan Dollar against the US dollar has attracted significant market attention. Data from the USD exchange rate trend chart shows that in early May, within just two trading days, the NT$ appreciated nearly 10%, with the single-day increase setting a 40-year record. On May 2, the NT$ against the USD rose by 5% in one day, closing at 31.064 yuan, and then on May 5, it further broke the psychological barrier of 30 yuan, with an intraday high of 29.59 yuan, hitting a 15-month high. This intense exchange rate volatility not only triggered the third-largest trading volume in the history of the foreign exchange market but also caused ongoing market doubts about the subsequent trend.

Compared to other Asian currencies, the NT$'s appreciation is particularly remarkable. During the same period, the Singapore dollar rose by 1.41%, the Japanese yen by 1.5%, and the Korean won by 3.8%. However, the rapid appreciation of the NT$ stands out among Asian currencies. Notably, from the beginning of the year until early April, before Trump announced tariffs, the NT$ was still depreciating by about 1%. The situation reversed within just a month, reflecting a dramatic shift in market expectations.

As a typical export-oriented economy, Taiwan’s net foreign investment accounts for as much as 165% of GDP, making its economy highly sensitive to exchange rate fluctuations. The abnormal appreciation of the NT$ has triggered market panic. Taiwan’s President Lai Ching-te issued a five-point statement to stabilize the market, and the Central Bank Governor Yang Chin-Long held a press conference to clarify that the central bank did not intervene in the currency market and denied pressure from the US side. Nonetheless, market sentiment remains volatile.

Three Major Factors Driving the NT$ Appreciation

Trump’s Trade Policies as the Catalyst for Appreciation

The general consensus is that the trigger for this rapid appreciation of the NT$ stems from adjustments in Trump’s trade policies. When Trump announced a 90-day delay in implementing reciprocal tariffs, two major expectations formed in the market: a wave of centralized procurement globally, with Taiwan as a key supply chain participant benefiting in the short term; and an unexpected upward revision of Taiwan’s economic growth forecast by the IMF, coupled with strong performance in the Taiwan stock market. These positive news drove a large influx of foreign capital, becoming the main driver of the NT$’s rise.

Limited Policy Space for the Central Bank Creates Structural Dilemmas

On May 2, the day the NT$ surged sharply, the central bank issued an emergency statement but avoided addressing key issues. The bank attributed the currency fluctuation to “market expectations that trade partners’ currencies may appreciate due to the US,” but did not directly respond to concerns about whether US-Taiwan tariff negotiations involved exchange rate clauses.

The Trump administration’s “Fair and Reciprocal Trade Plan” explicitly emphasizes “currency intervention” as a review focus, heightening market concerns about the central bank’s policy space. Under the context of US-Taiwan negotiations, the central bank may find it difficult to intervene forcefully in the currency market as in the past. This concern is not unfounded—Taiwan’s trade surplus in the first quarter reached $23.57 billion, up 23% year-on-year, with the US trade surplus soaring by 134% to $22.09 billion. If the central bank cannot effectively intervene, the NT$ faces significant upward pressure.

Financial Institutions’ Hedging Operations Amplify Volatility

UBS’s latest research report indicates that the 5% single-day appreciation of the NT$ on May 2 exceeds what traditional economic indicators can explain. The report analyzes that, beyond market sentiment, large-scale hedging operations by Taiwanese insurers and corporations, as well as concentrated closing of NT$ financing arbitrage trades, jointly caused this exchange rate movement.

UBS warns that when the NT$ retraces, insurers and exporters may further increase their hedging ratios. Simply restoring foreign exchange hedging/deposits to trend levels could trigger about US$100 billion in dollar selling pressure, equivalent to 14% of Taiwan’s GDP. This potential risk warrants close attention. The Financial Times reported on May 3 that Taiwanese life insurers hold up to US$1.7 trillion in overseas assets (mainly US Treasuries), but have long lacked sufficient currency hedging measures, and “panic hedging” has become a key factor in driving the NT$ higher.

USD Exchange Rate Trend Chart Shows: Appreciation Has Room but Faces Resistance

Reasonable Valuation Range and Appreciation Potential Analysis

An important indicator for assessing exchange rate rationality is the BIS’s real effective exchange rate index(REER). As of the end of March, the USD index was about 113, indicating a significant “overvaluation,” while the NT$ index remained around 96, in a “reasonably undervalued” state. In comparison, major Asian export currencies are more undervalued, with the Japanese yen and Korean won indices at only 73 and 89, respectively.

UBS’s latest report states that although the NT$ has recently surged sharply, its appreciation trend is likely to continue from multiple dimensions. Valuation models show the NT$ has shifted from moderate undervaluation to a fair value that is 2.7 standard deviations higher; the foreign exchange derivatives market indicates the “strongest appreciation expectation in five years”; and historical experience suggests that similar large single-day increases often do not immediately retrace. UBS advises investors not to prematurely reverse positions but expects that when the trade-weighted index of the NT$ rises another 3% (approaching the central bank’s tolerance limit), official intervention may intensify.

( 28 Yuan Level Difficult to Break

Most industry insiders believe that the possibility of the NT$ reaching 28 per USD is very low. The market generally expects pressure from the Trump administration for the NT$ to continue appreciating, but the specific appreciation magnitude remains uncertain.

) Long-term Regional Currency Synchronization

If the observation period is extended from the recent abnormal volatility to since the beginning of the year, it is found that the cumulative appreciation of the NT$ against the USD is roughly in the same range as the yen and won: NT$ +8.74%, yen +8.47%, won +7.17%. Despite the recent rapid appreciation, from a longer-term perspective, its trend remains synchronized with regional currencies.

Past Decade of Exchange Rate Fluctuations and Benchmark References

The ten-year data of the USD exchange rate chart (October 2014 to October 2024) shows that the NT$ against the USD has fluctuated between 27 and 34, with a volatility of 23%, relatively stable compared to global currencies. In contrast, the historically risk-averse Japanese yen experienced a volatility of up to 50% (from 99 to 161), twice that of the NT$.

The NT$’s rise and fall are mainly driven by the Fed’s interest rate hike and cut policies. During 2015–2018, amid China’s stock market crash and the European debt crisis, the US slowed down QT and continued quantitative easing, strengthening the NT$. After 2018, the US began raising interest rates, but following the pandemic outbreak in 2020, the Fed rapidly expanded its balance sheet to double (from $4.5 trillion to $9 trillion), lowered rates to zero, and the dollar depreciated, pushing the NT$ to 27.

Post-2022, due to runaway US inflation, the Fed started aggressive rate hikes, causing the dollar to surge. After the 2008 financial crisis, the Fed launched three rounds of QE; after the December 2013 decision to taper QE, capital flowed back to the US from emerging markets, and the USD/NT$ exchange rate rose from its 2013 low to 33. Until September 2024, when the Fed ended this cycle of high interest rates and began cutting, the exchange rate returned to 32.

In summary, over the past decade, there is a common “exchange rate benchmark” in the market: USD below 30 is considered buyable, above 32 should be considered for selling.

Investment Strategy Recommendations

Short-term Traders’ Approach

For investors with FX trading experience willing to bear risks, they can directly engage in short-term trading of USD/TWD or related currency pairs in the forex market, capturing daily or even intraday volatility opportunities. If holding USD assets, derivatives like forward contracts can be used to lock in NT$ appreciation gains.

Risk Management Tips for Beginners

Newcomers to FX trading should remember these principles if participating in recent volatility: start with small amounts to test the waters, avoid impulsively increasing positions, and prevent emotional trading from enlarging losses. It’s advisable to begin with low leverage on USD/TWD and set clear stop-loss points to protect capital. Many platforms offer free demo environments to test trading strategies first.

Long-term Investment Allocation Suggestions

In the long run, Taiwan’s economic fundamentals are stable, with strong semiconductor exports. The NT$ may fluctuate between 30 and 30.5, maintaining relative strength. However, FX positions should be controlled within 5%-10% of total assets, with the rest diversified into other global assets to reduce risk. Close attention should be paid to Taiwan’s central bank actions and US-Taiwan trade negotiations, as these will directly influence the exchange rate trend.

Avoid concentrating all investments in a single currency pair; consider pairing with Taiwan stocks or bonds to make the overall portfolio’s risk more manageable. Achieving steady FX gains requires low leverage and strict capital management.