New Taiwan Dollar breaks through the 30 integer mark. Is there still room for the USD/TWD(USD/TWD) to rise in the future? A comprehensive analysis of investment opportunities in 2025

Will the US dollar continue to appreciate against the New Taiwan dollar? Let’s look at these four key indicators

The New Taiwan dollar has recently shown strong performance, sparking widespread market discussion about its future trend. Can the NTD’s upward momentum continue, or will it face a correction pressure?

The Golden Indicator for Exchange Rate Rationality

To assess whether a country’s currency is overvalued or undervalued, the Bank for International Settlements(BIS)'s real effective exchange rate index(REER) is the most valuable reference. The index uses 100 as the equilibrium point; above 100 indicates overvaluation, below 100 suggests undervaluation.

According to the latest data:

• US dollar index is about 113 → clearly overvalued
• New Taiwan dollar index remains around 96 → shows a reasonably low bias
• Yen and Korean won indices are 73 and 89 respectively → major Asian currencies are generally undervalued

In other words, the New Taiwan dollar still has room to rise compared to regional currencies.

Signals from the Historical Valuation Model

UBS’s latest research indicates that the New Taiwan dollar has shifted from moderate undervaluation to a fair value that is 2.7 standard deviations higher; the foreign exchange derivatives market also shows the “strongest appreciation expectation in five years.” These data all suggest that the NTD’s surge may continue in the short term.

However, it is worth noting that when the trade-weighted index of the NTD rises another 3% (approaching the central bank’s tolerance limit), official intervention may intensify, thereby smoothing exchange rate volatility.

How Difficult Is the 28-NTD Level?

Although the market expects the US government to pressure the NTD to continue appreciating, most industry insiders believe that reaching 28 per US dollar remains unlikely. From the current fundamentals, breaking this level in the short term is quite challenging.

Performance Since the Beginning of the Year Compared to the Region

Looking at the full year, the NTD’s performance is not unique:

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

Major Asian currencies have appreciated within a similar range, reflecting a regional trend of currency appreciation.

The Behind-the-Scenes Drivers of the NTD’s Short-Term Skyrocketing

First Wave: Trade Expectations and Policy Guidance

After President Trump announced a 90-day delay in implementing reciprocal tariffs, two major market expectations emerged: global buyers would concentrate orders to Taiwan to avoid tariffs, and the IMF unexpectedly raised Taiwan’s economic growth forecast. These positive news boosted foreign capital inflows, providing strong initial support for the NTD exchange rate.

Second Wave: The Dilemma of Official Policy

The central bank faces a delicate policy balancing act. On one hand, the US “Fair and Reciprocal Trade Plan” explicitly emphasizes “intervention” as a review focus; on the other hand, Taiwan’s trade surplus in Q1 reached US$23.57 billion, with a 134% surge in surplus with the US to US$22.09 billion, creating significant objective pressure for the NTD to appreciate.

If the central bank intervenes forcefully as in the past, it risks being accused of currency manipulation by the US; if it loosens control, the NTD could face uncontrollable appreciation. This dilemma is directly reflected in exchange rate fluctuations.

Third Wave: The Invisible Hand—Financial Institutions’ Concentrated Hedging Operations

UBS reports reveal a key phenomenon: large-scale FX hedging by Taiwanese insurers and exporters, along with concentrated unwinding of NTD financing arbitrage trades, has amplified exchange rate volatility.

The data is startling—Taiwan’s life insurers hold up to US$1.7 trillion in overseas assets (mainly US Treasuries), historically relying on the central bank to suppress NTD appreciation to protect dollar assets. But as the central bank faces policy constraints, these institutions have suddenly increased hedging operations, creating a strong buy-side pressure on the NTD.

UBS warns that if FX hedging/deposits revert to trend levels, it could trigger about US$100 billion in dollar selling pressure (equivalent to 14% of Taiwan’s GDP), a potential risk that warrants close attention.

A Decade in Review: The Regularity of NTD Exchange Rate Fluctuations

Long-term Range and Characteristics

Over the past decade (October 2014 to October 2024), USD/NTD has oscillated between 27 and 34, with a volatility of 23%. Compared to other currencies globally, this range isn’t large—Yen/USD fluctuates by about 50% (between 99 and 161), twice the volatility of the NTD.

The True Main Driver of Exchange Rate Trends: The Federal Reserve

The past decade’s exchange rate movements have been almost entirely driven by the Fed’s monetary policy:

From 2015 to 2018, European debt crises and China’s stock market crash triggered risk aversion, leading the Fed to slow down balance sheet reduction and even restart quantitative easing, strengthening the NTD.

Post-2018, as the Fed believed the economy was improving, it began raising interest rates. But in 2020, with the pandemic, the Fed hurriedly expanded its balance sheet from US$4.5 trillion to US$9 trillion, and cut rates to zero. This caused the dollar to depreciate sharply, and the NTD briefly hit 27 to buy 1 USD.

After 2022, US inflation spiraled out of control, prompting the Fed to rapidly hike interest rates, causing the dollar to surge again, and the exchange rate to rebound. It wasn’t until September 2024, when the Fed ended its high-rate cycle and started cutting, that the rate fell back to around 32.

A “Well-Known Integer Level”

In Taiwanese investors’ minds, there is a conventional reference point: 30. Most believe that USD/NTD below 30 offers buying opportunities, while above 32 suggests selling. For long-term FX investments, this can serve as an important decision reference.

How to Seize Opportunities During the NTD Appreciation Cycle

For Experienced Forex Traders

First, you can operate directly on forex platforms with USD/TWD or related currency pairs, engaging in short-term swing trading to capture daily or intra-day fluctuations.

Second, if you already hold USD assets, you can hedge using forward contracts or other derivatives, locking in gains from NTD appreciation and adjusting positions at the right time.

For Newcomers to Forex Investing

To participate in recent exchange rate movements, remember these golden principles:

1. Start small—don’t invest all your capital at once.
2. Avoid impulsive doubling down; losing control can lead to huge losses.
3. Choose low-threshold platforms for small short-term trades, and learn the strategy’s feasibility through actual trading.

The key is to set stop-loss points to protect yourself. Many forex platforms offer free demo accounts—new traders should open one to practice repeatedly and verify whether their trading logic works in real markets.

Long-term Investment Allocation Strategy

Taiwan’s economic fundamentals are solid, with semiconductor exports continuing to thrive. The NTD may fluctuate normally within the 30~30.5 range, with a long-term bias toward strength. But FX positions should be controlled within 5%-10% of total assets, with remaining funds diversified into other global assets, maintaining overall portfolio risk within manageable levels.

Prudent Profit-Operation Suggestions

Use low leverage when trading USD/TWD, strictly adhere to stop-loss rules. Keep a close eye on Taiwan’s central bank policies and US-Taiwan trade negotiations, as these factors directly influence exchange rate directions.

Additionally, avoid concentrating all investments in a single asset; diversify with Taiwanese stocks or bonds. This way, even if exchange rates fluctuate significantly, the overall portfolio risk remains stable.

In summary, when observing the NTD exchange rate trend chart, pay attention to short-term policy changes and market sentiment, but also consider long-term fundamentals and valuation indicators to make more comprehensive investment decisions.