The 2025 USD to TWD trend undergoes a major shift! From skyrocketing past 30 to future strategies, a must-see exchange rate analysis for investors

NT Dollar Short-Term Surge: How Far Can This Appreciation Go?

Recently, the NT dollar exchange rate has experienced unprecedented volatility in decades. On May 2nd, it surged by 5% in a single day, marking the largest single-day gain in 40 years. Subsequently, on May 5th, it broke through the psychological 30 NT dollar per USD level, with a total two-day increase approaching 10%. Such aggressive movement is unique among Asian currencies—while the Singapore dollar rose 1.41%, the Japanese yen appreciated 1.5%, and the Korean won increased 3.8%, none are as remarkable as the NT dollar.

To understand the potential and risks of this NT dollar appreciation wave, we must first grasp the three main driving forces behind it.

【Comprehensive Analysis of NT Dollar Appreciation】How Three Factors Trigger a Forex Market Storm

Trump’s Tariff Policies as the Catalyst

U.S. President Trump announced a 90-day delay in implementing reciprocal tariffs, immediately creating two market expectations: on one hand, a wave of global procurement will be triggered, and Taiwan—an export-oriented economy with net foreign investment accounting for 165% of GDP—will benefit in the short term, providing strong support for the NT dollar; on the other hand, the IMF unexpectedly raised Taiwan’s economic growth forecast, coupled with impressive Taiwan stock market performance, these positives have sparked a frenzy of foreign capital inflows, becoming the first wave of upward momentum for the NT dollar.

The Central Bank Faces an Unprecedented Dilemma

Trump’s “Fair Reciprocity Plan” explicitly emphasizes “currency intervention” as a key review point. This has raised concerns that the Central Bank may find it difficult to intervene as forcefully as in the past—after all, Taiwan’s trade surplus in the first quarter reached $23.57 billion (up 23% YoY), with the U.S. surplus surging 134% to $22.09 billion. Against the backdrop of U.S.-Taiwan negotiations, if the Central Bank lacks intervention, the NT dollar indeed faces significant appreciation pressure. Although Governor Yang Jinlong has repeatedly clarified that the Central Bank has not intervened, market uncertainty about the Central Bank’s stance has already altered the exchange rate trend.

Financial Institutions’ Hedging Operations Amplify Volatility

A UBS research report pointed out that the abnormal surge on May 2nd exceeded traditional economic indicator explanations. Beyond market sentiment, large-scale FX hedging operations by Taiwanese insurers and exporters, along with concentrated unwinding of NT dollar financing arbitrage trades, jointly caused this fluctuation. The Financial Times further revealed that Taiwanese life insurers hold overseas assets totaling $1.7 trillion (mainly U.S. Treasuries), yet have long lacked sufficient hedging measures. The expectation that “the Central Bank can effectively suppress appreciation” has now been shattered, leaving insurers in a “panic hedging” dilemma. UBS warns that restoring FX hedging to trend levels could trigger about $100 billion in USD selling pressure (equivalent to 14% of Taiwan’s GDP).

A 20-Year Review of the US Dollar Exchange Rate: Identifying the Boundaries of NT Dollar Appreciation

Over the past decade (2014–2024), the USD/TWD exchange rate has fluctuated between 27 and 34, with only a 23% range, indicating relatively low volatility compared to global currencies. In contrast, the Japanese yen, considered a safe-haven currency, has experienced a 50% fluctuation (from 99 to 161 yen per USD), twice that of the NT dollar!

During these ten years, the NT dollar’s trend has been mainly driven by FED policies:

• 2015–2018: China stock market crash and European debt crisis prompted the Fed to slow down QT, leading to a strengthening NT dollar.
• 2020–2022: COVID-19 caused the U.S. balance sheet to expand from $4.5 trillion to $9 trillion, with interest rates dropping to zero, pushing the NT dollar to 27 per USD.
• 2022–present: U.S. inflation spiraled out of control, causing the Fed to rapidly raise interest rates, and the USD appreciated inversely until September 2024, when rate cuts began.

The key determinant of the NT dollar’s rate movements is the FED’s policy, not the Taiwan Central Bank.

Is 28 the Ceiling? Using Valuation Metrics to Assess Appreciation Potential

The BIS (Bank for International Settlements) constructs the real effective exchange rate index (REER), a key indicator for assessing whether an exchange rate is over- or undervalued (with 100 as the equilibrium value; above 100 indicates overvaluation, below 100 undervaluation):

As of the end of March:

• USD REER index is about 113 → clearly overvalued
• NT dollar REER index is about 96 → reasonably undervalued
• Yen REER is only 73, Korean won 89 → generally undervalued among Asian export currencies

From a mid-term perspective since the start of the year, the appreciation rates are roughly:

• NT dollar +8.74%
• Yen +8.47%
• Won +7.17% These are largely synchronized. Although the NT dollar has appreciated rapidly recently, its long-term trend aligns with regional currencies’ overall performance.

Most industry insiders believe that the possibility of the NT dollar reaching 28 is extremely low. UBS reports that the NT dollar has shifted from moderate undervaluation to a fair value that is 2.7 standard deviations higher, with FX derivatives markets showing the “strongest appreciation expectation in five years.” However, historical experience suggests that after such large single-day jumps, immediate retracement is unlikely. UBS recommends that when the trade-weighted index of the NT dollar rises another 3% (approaching the central bank’s tolerance limit), authorities may step up intervention to smooth volatility.

Investment Strategies for 2025: How to Profit from NT Dollar Appreciation

Aggressive Strategies for Forex Traders

If you are confident in market volatility, you can directly trade USD/TWD on FX platforms, capturing short-term swings over days or even within a single day; or use derivatives like forward contracts to lock in NT dollar appreciation gains. But always set stop-loss points to protect yourself.

Prudent Advice for Beginners

New investors aiming to seize recent volatility should remember these principles: start with small amounts to test the waters, avoid impulsive continuous adding. Many FX platforms offer demo accounts—use them to test your strategies. Use low leverage when trading USD/TWD, and experience short-term fluctuations with small capital.

Long-term Investors’ Allocation Approach

Taiwan’s economic fundamentals remain solid, with robust semiconductor exports. The NT dollar may oscillate around 30–30.5, remaining relatively strong. But risk management is key—limit FX positions to 5–10% of total assets, and diversify remaining funds into other global assets (Taiwan stocks, bonds, etc.) to keep overall portfolio risk manageable.

Three Key Real-Time Indicators to Watch

Keep a close eye on these factors, as they directly influence exchange rates: Taiwan’s central bank policy stance, U.S.-Taiwan trade negotiations, and Federal Reserve interest rate policies. The market generally considers USD below 1:30 as suitable for phased buying, and above 1:32 as a signal to sell in parts, serving as a reference for long-term FX investment.

Conclusion: NT Dollar Appreciation Is Both an Opportunity and a Risk

This wave of NT dollar surge reflects profound changes in the global exchange rate system. While the short-term momentum remains, levels around 28 or lower face policy interventions and fundamental constraints. Investors should calmly track the 20-year historical patterns of the USD exchange rate, avoid chasing highs, and diversify risks. Remember: there are no eternal bull markets—only disciplined trading and rational allocation can ensure steady gains amid currency fluctuations.