USD exchange rate trend forecast 2024: When will the Taiwan dollar peak? A 10-year data outlook for future planning

The US Dollar Exchange Rate Historical Lessons: Taiwan Dollar Volatility Lower Than Global Average

To understand the current outlook for the US dollar exchange rate trend, we need to extend the timeline. Over the past ten years (October 2014 to October 2024), the USD/TWD exchange rate has fluctuated repeatedly within the 27–34 range, with a volatility of about 23%. In comparison, the USD/JPY volatility has reached 50% (fluctuating between 99 and 161), which is twice that of the Taiwan dollar. What does this indicate? The Taiwan dollar is actually a relatively stable currency globally.

The logic behind this stability is simple—Taiwan’s currency fluctuations are not controlled by Taiwan’s central bank but are instead driven by the US Federal Reserve(FED)’s interest rate hike and cut policies. From 2015 to 2018, during the global Chinese stock market crash and European debt crisis, the FED slowed its balance sheet reduction and continued quantitative easing, causing the TWD to strengthen. By 2020, with the outbreak of the pandemic, the FED expanded its balance sheet from 4.5 trillion USD to 9 trillion USD in an emergency, lowering interest rates to zero, leading to a sharp depreciation of the dollar and a rapid appreciation of the TWD to around 27 per USD.

The reversal occurred in 2022. US inflation spiraled out of control, forcing the FED to initiate aggressive rate hikes, causing the dollar to surge. It wasn’t until September 2024 that the FED ended this high-interest cycle and began cutting rates, bringing the exchange rate back to around 32.

What has the Taiwan dollar been doing lately? What did the May volatility tell us?

Fast forward to May 2024—the Taiwan dollar experienced its most insane rally in nearly 40 years. On May 2, the USD/TWD plummeted 5% in a single day (TWD rose 5%), setting a 40-year record for the largest single-day gain, closing at 31.064. Just three days later, on May 5, the TWD appreciated another 4.92%, breaking the psychological 30 mark intraday, with a low of 29.59. In just two trading days, the TWD surged nearly 10%.

How intense was this rally? Forex trading volume hit the third-highest in history. Remember, from January to April, the TWD was still slightly depreciating.

Other Asian currencies also appreciated: SGD up 1.41%, JPY up 1.5%, KRW up 3.8%. But when comparing appreciation magnitudes, the TWD’s surge is unique among Asian currencies.

The three main drivers behind this USD trend

First layer: Diplomatic expectations from Trump’s tariff policies

The trigger was the US government’s tariff policy. When Trump announced a 90-day delay on reciprocal tariffs, two market expectations immediately emerged—global companies would rush to buy to avoid tariffs, and Taiwan, as one of the world’s largest chip exporters, could see a short-term surge in export orders; simultaneously, the IMF unexpectedly raised Taiwan’s economic growth forecast, coupled with stellar Taiwan stock market performance. These positive signals instantly triggered foreign capital inflows, becoming the first wave of TWD appreciation.

Second layer: The central bank’s dilemma amid political pressures

In an emergency statement on May 2, the central bank attributed the TWD’s appreciation to “market expectations that trade partners’ currencies may appreciate against the US dollar.” But this explanation also subtly signals another concern—the Trump administration’s “Fair and Reciprocal Trade Plan” explicitly includes “currency intervention” as a review item.

In other words, the central bank now faces a dilemma: in the past, Taiwan’s central bank could intervene at will to curb TWD appreciation, but under the broader US-Taiwan negotiations, large-scale intervention might lead the US Treasury to label Taiwan as a “currency manipulator.” This concern is not unfounded—Taiwan’s trade surplus with the US surged 134% to USD 22.09 billion in Q1, with net foreign investment in Taiwan reaching 165% of GDP. Without the central bank’s intervention, the TWD could face significant upward pressure.

Third layer: Financial industry’s concentrated hedging operations

UBS’s latest research report reveals another hidden driver behind this rally. The report states that the 5% single-day appreciation on May 2 far exceeds what traditional economic indicators can explain. Who are the real operators? Taiwan’s life insurance industry and exporters engaging in large-scale currency hedging.

The key figure is USD 1.7 trillion—the scale of Taiwan’s overseas assets (mainly US Treasuries) held by life insurers. For a long time, these insurers lacked sufficient hedging measures, mainly because “Taiwan’s central bank could effectively suppress TWD appreciation.” But now, the situation has changed. As the central bank becomes politically constrained and unable to intervene strongly, these insurers are panic-hedging. The Financial Times analysis points directly to—this wave of currency appreciation is mainly driven by the concentrated actions of Taiwan’s life insurers’ risk-averse behavior.

UBS even warns that when the TWD corrects, insurers and exporters may further increase hedging, potentially triggering USD 100 billion in dollar selling pressure (about 14% of Taiwan’s GDP).

USD exchange rate forecast after 2024: How high can the TWD go?

Where is the appreciation limit? Not at 28, market consensus is around 30

Most market participants expect continued pressure from the US government for the TWD to appreciate, but opinions differ on the extent. The majority consensus is: It’s unlikely the TWD will reach 28 per USD. The more realistic range is between 30 and 30.5.

Using BIS real effective exchange rate (REER) index(REER) to assess valuation levels

A key tool for evaluating currency valuation is the BIS’s real effective exchange rate index. The index is normalized at 100—above 100 indicates overvaluation, below 100 undervaluation.

As of the latest data at the end of March:

• USD REER is about 113 → clearly overvalued
• TWD REER is about 96 → still reasonably undervalued

It’s worth noting that other major Asian export currencies are even more undervalued—JPY index at 73, KRW at 89. This suggests that when the TWD reaches its current level, there is still room for further appreciation from a valuation perspective, but the space is limited.

Horizontal comparison: TWD appreciation vs. regional currencies

If we extend the observation period from recent abnormal fluctuations to early 2024 until now, an interesting fact emerges:

• TWD appreciation: 8.74%
• JPY appreciation: 8.47%
• KRW appreciation: 7.17%

From a longer-term perspective, the TWD’s appreciation rate is in sync with regional currencies. The recent rapid rise may seem impressive, but in the context of the annual trend, it’s just normal movement.

UBS’s outlook: Further appreciation expected

UBS’s research conclusion is quite clear: although the recent TWD rally has been fierce, multiple indicators suggest the appreciation trend will continue. Reasons include:

First, valuation models show the TWD has shifted from moderate undervaluation to a level about 2.7 standard deviations above fair value; second, FX derivatives markets show the “strongest appreciation expectation in five years”; third, historical experience indicates that similar large single-day jumps are rarely followed by immediate reversals.

However, UBS also issues an important warning: when the trade-weighted TWD index rises another 3% and approaches the central bank’s tolerance limit, official intervention is likely to increase to smooth volatility. In other words, further appreciation is possible but not unlimited.

Investment strategies for different investors regarding USD exchange rate operations

For seasoned FX traders: direct trading or forward hedging

If you have FX trading experience and high risk tolerance, there are two options. One is to trade USD/TWD and other currency pairs directly on FX platforms, capturing short-term or intraday volatility; the other is to hedge USD assets via derivatives like forward contracts, locking in the TWD appreciation gains.

For beginners: small-scale testing and strict leverage control

New investors should not be tempted by the “huge profits” from this rally. Remember three principles: start with small amounts, gradually increase positions, and never go all-in impulsively. Many FX platforms offer demo accounts—beginners should thoroughly test their strategies in simulation before risking real money.

For long-term asset allocators: limit TWD holdings to 5-10% of total assets

Taiwan’s economic fundamentals are solid—leading semiconductor industry, ample FX reserves, stable current account surplus. Over the long term, the probability of the TWD maintaining strength in the 30–30.5 range is not low. But this does not mean all chips should be placed on FX. FX holdings should be limited to 5-10% of total investment portfolio, with the rest diversified into global stocks, bonds, and other assets to manage risk effectively.

Operational tips: low leverage + stop-loss essential

Regardless of strategy, the core to profiting from FX differences is low-leverage trading of USD/TWD. Always set stop-loss points—if the exchange rate moves against expectations, exit immediately. Don’t rely on market reversal. Also, keep a close eye on key statements from Taiwan’s central bank and the latest US-Taiwan trade negotiations—these will directly influence future exchange rate movements.

Key conclusion: Taiwan dollar balances market expectations and central bank intervention

Returning to the initial question—will the TWD continue to rise? Based on current fundamentals, policies, and technical analysis, the answer is yes, but not infinitely.

The market consensus target is around 30 per USD; exceeding 30 but staying above 28 is within expectations. The key to whether the TWD can go higher depends on how the central bank balances US political pressure and financial stability. If the TWD appreciates beyond the central bank’s tolerance level (estimated around 3%), official intervention will likely increase, slowing the appreciation.

For investors, capturing this rally is not about betting on continuous appreciation but about formulating reasonable position sizes and stop-loss strategies based on risk appetite. In times of high market sentiment and ambiguous central bank policies, maintaining rationality and discipline often yields more stable returns than blindly chasing the rally.