New Taiwan Dollar directly to 29! How high will the US Dollar rise? The latest 2025 exchange rate forecast and analysis

New Taiwan Dollar against the US Dollar skyrocketed nearly 10% within just two trading days, setting the most astonishing single-day gain record in forty years. Is this surge a fleeting market fluctuation or a signal of a long-term appreciation trend? How should investors seek opportunities amid this exchange rate turbulence? This article will analyze the core factors driving the TWD’s appreciation, interpret reasonable expectations for the USD’s rise, and provide practical forex trading strategies for investors.

TWD Breaks Historical Barriers! From Panic at 34 to the Miracle at 29

Just thirty days ago, the market was still shrouded in gloom over the Taiwan stock market’s sharp decline and fears of the TWD depreciating past 34 or even 35 yuan. Who would have thought the turning point would come so suddenly?

On May 2, the TWD/USD exchange rate surged 5% in a single day, rewriting the forty-year record for the largest single-day increase, closing at 31.064 yuan, a fifteen-month high. During Monday’s trading session, the rally intensified—on May 5, the TWD continued to rise by 4.92%, breaking through the critical psychological barrier of 30 yuan intra-day, reaching a high of 29.59 yuan.

How significant is the impact of this appreciation? In just two trading days, the TWD surged nearly 10%, with forex trading volume hitting the third-highest in history. In comparison, the Singapore dollar rose 1.41%, the Japanese yen 1.5%, and the Korean won 3.8%. The TWD’s appreciation stands out among Asian currencies.

Notably, before the announcement of Trump’s tariff policies on April 2, the TWD was still in a depreciating trend. This indicates how astonishing this surge is—turning from decline to rise within thirty days, with an increase exceeding 10%.

As a typical export-oriented economy, Taiwan’s net foreign investment accounts for up to 165% of GDP, making its economy highly sensitive to exchange rate fluctuations. Facing such an extraordinary rally, top government officials quickly moved to stabilize the market: President Tsai Ing-wen issued a five-point statement to reassure the market, and Central Bank Governor Yang Chin-long held a press conference clarifying that the central bank did not intervene in the forex market. Yet, market sentiment remains volatile.

The Three Main Drivers of This TWD Surge

US Tariff Policies as the Direct Trigger

The Trump administration’s tariff policies became the immediate spark for this appreciation. After Trump announced a 90-day delay in implementing reciprocal tariffs, two strong market expectations emerged:

First, a wave of centralized procurement globally is anticipated, which could benefit Taiwan’s exports in the short term. This expectation provides strong support for the TWD. Second, the International Monetary Fund (IMF) unexpectedly raised Taiwan’s economic growth forecast, coupled with stellar performance in the Taiwan stock market. These positive news items attracted a frenzy of foreign capital inflows, becoming the first momentum driving the TWD’s surge.

The Central Bank Faces a Dilemma

The central bank encountered an unprecedented dilemma in forex intervention. On May 2, the day the TWD skyrocketed, the central bank issued an emergency statement but avoided addressing key issues:

Regarding the market’s most concern—whether US-Taiwan negotiations involve exchange rate clauses—the central bank remained silent, attributing the volatility solely to “market expectations that the US may demand currency appreciation from trade partners.” This response failed to allay market fears.

In fact, Trump’s “Fair and Reciprocal Trade” plan explicitly emphasizes “exchange rate intervention” as a review focus. This means that if the central bank intervenes forcefully as in the past, it risks being labeled as a currency manipulator by the US, potentially triggering international trade disputes.

Taiwan’s first-quarter data further complicate this dilemma: a trade surplus of USD 23.57 billion, up 23% year-on-year, with the US trade surplus soaring 134% to USD 22.09 billion. Without intervention, the TWD indeed faces enormous upward pressure.

Financial Institutions’ Hedging Amplifies Volatility

UBS’s latest research report indicates that the abnormal volatility on May 2 has exceeded the scope explained by traditional economic indicators. The analysis suggests that, beyond market sentiment, large-scale forex hedging operations by Taiwanese insurers and corporations, along with concentrated unwinding of TWD financing arbitrage trades, jointly caused this dramatic fluctuation.

The Financial Times of the UK further states that panic hedging by Taiwanese life insurers’ massive USD assets—mainly US Treasuries—was the main driver of this currency surge. Taiwanese life insurers hold overseas assets worth up to USD 1.7 trillion but have long lacked sufficient currency hedging measures. Why? Because in the past, the Taiwan central bank could effectively suppress significant TWD appreciation, so insurers did not rush to hedge. But now, the situation has reversed: the central bank fears intervention being labeled as currency manipulation by the US Treasury, forcing insurers into frantic responses.

UBS warns that when the TWD retraces, insurers and exporters may further increase hedging ratios. Restoring forex hedging to trend levels could trigger about USD 100 billion in dollar selling pressure, equivalent to 14% of Taiwan’s GDP, a potential risk not to be underestimated.

Central Bank Governor Yang Chin-long rebutted this at the May 5 press conference, emphasizing that life insurers have not significantly increased operations, but market acceptance of this explanation remains limited.

How High Will the USD Rise? Market Outlook in Detail

Investors’ most pressing question: Will the TWD continue to appreciate? How low will the USD go?

Key Resistance Level Analysis

Most industry insiders believe that the possibility of the TWD reaching 28 per USD is minimal. This psychological barrier seems to be the market’s perceived upper limit for appreciation.

A key tool for assessing exchange rate rationality is the real effective exchange rate index (REER) compiled by the Bank for International Settlements (BIS). The index uses 100 as the baseline; above 100 indicates overvaluation, below 100 suggests undervaluation risk.

As of the latest data at the end of March:

• US Dollar Index approximately 113 → clearly overvalued
• TWD Index approximately 96 → reasonably undervalued
• JPY Index only 73 → greatest undervaluation
• KRW Index 89 → also undervalued

This data reveals an interesting phenomenon: major Asian export currencies are generally undervalued, possibly indicating larger appreciation potential.

Regional Currency Performance Comparison

Extending the observation period from recent abnormal volatility to year-to-date, we find an unexpected conclusion: the appreciation of the TWD is roughly comparable to the Japanese yen and Korean won.

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

Despite the recent dramatic rapid appreciation, from a longer-term perspective, the TWD’s trend aligns with regional currencies, with no extraordinary outperformance.

UBS Forecast Framework

UBS analyzes the TWD’s appreciation trend from multiple dimensions and concludes that appreciation will continue:

First, valuation models show the TWD has shifted from moderate undervaluation to a fair value exceeding the mean by 2.7 standard deviations, implying that the room for further appreciation is narrowing but still exists.

Second, forex derivatives markets indicate the “strongest five-year appreciation expectation”, with market consensus supporting a stronger TWD.

Third, historical experience suggests that after similar large single-day gains, immediate retracement is unlikely. This strong technical support warrants attention.

UBS advises investors not to prematurely reverse positions. However, when the TWD trade-weighted index rises another 3% (approaching the central bank’s tolerance limit), authorities may intensify intervention to smooth volatility. In other words, a new equilibrium zone between 30 and 29.7 yuan could form.

Strategies for Different Investors

Advice for Forex Traders

If you have extensive forex trading experience and high risk tolerance, consider two approaches:

Short-term trading: Use forex platforms to directly trade USD/TWD or related currency pairs, capturing daily or intra-day volatility. Remember, short-term trading requires advanced technical skills and risk management.

Derivative hedging: If you hold USD assets, utilize forward contracts and other derivatives to hedge, enjoying TWD appreciation while locking in exchange rate risk.

Advice for Forex Beginners

If you want to follow the trend and seize recent volatility opportunities but lack experience, keep in mind:

First, start small: Use small amounts to test your trading strategies and psychological resilience. Many platforms offer demo accounts—practice with simulated trading to verify your approach.

Second, avoid impulsive adding: Don’t keep increasing positions after small gains; a sudden shift in sentiment can wipe out your entire capital.

Third, operate with low leverage: The key to steady forex profit is low leverage. Set clear stop-loss points to protect your principal.

Fourth, choose the right platform: Opt for platforms supporting small-scale short-term trading, demo accounts, and intuitive interfaces—more suitable for beginners to gain experience.

Advice for Long-term Investors

Taiwan’s economy is solid, with robust semiconductor exports, supporting the TWD’s long-term relative strength. Expect the TWD to fluctuate within a range of 30 to 30.5 yuan.

However, when investing in forex long-term, risk control is crucial: limit forex positions to 5%-10% of total assets, and diversify remaining assets globally to effectively manage overall risk.

Additionally, keep an eye on Taiwan’s central bank policies and the latest developments in US-Taiwan trade negotiations, as these factors directly influence exchange rates. Combining forex with investments in Taiwan stocks or bonds can help diversify your portfolio.

A Decade in Review: The Fluctuation Pattern of USD/TWD

Over the past decade (October 2014 to October 2024), USD/TWD has oscillated between 27 and 34, with a volatility of 23%. In comparison, USD/JPY fluctuated between 99 and 161, with a volatility of 50%, twice that of the TWD. From a global currency perspective, the TWD’s volatility is relatively moderate.

Causes Behind Exchange Rate Fluctuations

The TWD’s small interest rate swings mean its movements are mainly driven by the US Federal Reserve (FED) policies.

2015–2018: China stock market crash and European debt crisis; the US slowed its quantitative tightening (QT) and continued quantitative easing (QE), leading to a strengthening TWD.

Post-2018: The US believed the economy was performing well, began raising interest rates and shrinking its balance sheet. This plan was interrupted by the 2020 pandemic.

2020–2022: US assets ballooned from USD 4.5 trillion to USD 9 trillion; interest rates dropped to zero. Under this backdrop, the USD depreciated, and the TWD appreciated to around 27 yuan.

Post-2022: US inflation spiraled out of control; the Fed launched rapid rate hikes, causing the USD to rebound from 27 to about 32 yuan, fluctuating within this range.

After September 2024: The Fed ended this high-interest cycle and began cutting rates, bringing the exchange rate back to around 32 yuan.

Significance of Historical Highs

Since the 2008 financial crisis, the Fed launched three rounds of quantitative easing. In December 2013, the Fed announced tapering QE, leading to rising US interest rates and capital flowing back to the US from emerging markets. The USD/NTD exchange rate rose from the 2013 lows to 33 yuan. This appreciation lasted over a decade until September 2024, when the Fed started cutting rates, bringing the rate back to 32 yuan.

Based on historical experience, many investors hold an “invisible ruler”: most consider USD below 30 as a buying zone, and above 32 as a selling point. For long-term forex investments, this can serve as a reference.

Overall, the appreciation trend of the TWD is supported by fundamentals. How high the USD will rise depends on the Fed’s policy trajectory and Taiwan-US trade negotiations. In this uncertain environment, risk management and flexible strategies are the keys to successful investing.