USD to TWD exchange rate 30 yuan psychological barrier broken! In-depth analysis of the 2025 exchange rate trend

NT Dollar Experiences Largest Single-Day Gain in 40 Years, Short-Term Volatility Surpasses Expectations

In early May this year, the New Taiwan Dollar (NTD) against the US dollar experienced a rare extreme market event. The single-day volatility surpassed decades of records — on May 2, the NTD/USD exchange rate surged by 5%, setting a new 40-year record for the largest single-day increase, closing at 31.064, reaching a 15-month high. Immediately following, on May 5, the NTD continued to rise by 4.92%, breaking the psychological 30-level barrier intraday, with a peak of 29.59.

This currency fluctuation can be regarded as a historic market event — within just two trading days, the NTD appreciated nearly 10%, not only breaking multiple historical records but also triggering the third-largest trading volume in foreign exchange market history. In comparison, other major Asian currencies during the same period showed relatively mild performance — the Singapore dollar rose by 1.41%, the Japanese yen by 1.5%, and the Korean won by 3.8%. The sharp surge of the NTD stands out among Asian currencies, truly shocking the market.

It is worth noting that from the beginning of this year until April 2, before US President Trump announced reciprocal tariff policies, the NTD was actually in a slight depreciation of 1%. In less than a month, market expectations dramatically reversed.

Taiwan’s Economic Structure Determines Exchange Rate Sensitivity, Central Bank Faces Dilemma

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. When the NTD appreciates so dramatically, the government immediately finds itself in a balancing dilemma.

Taiwan’s top officials quickly issued statements to soothe the market — President Lai Ching-te issued a five-point statement, and Central Bank Governor Yang Chin-Long held a press conference to clarify that the central bank did not intervene in the currency market. However, this explanation only fueled further market doubts.

The key issue is that the Trump administration’s “Fair and Reciprocal Trade Program” explicitly targets “currency intervention” as a focus of review. Against this backdrop, the central bank’s traditional intervention tools face unprecedented constraints — it must prevent excessive appreciation of the NTD from harming exports, while also avoiding US accusations of currency manipulation. This dilemma is the deep root cause of the NTD’s intense volatility.

Three Major Factors Resonating, Unveiling the Behind-the-Scenes Drivers of the NTD Surge

First Layer: Expectations Ignited by Trump’s Tariff Policies

Trump’s announcement to delay the implementation of reciprocal tariffs by 90 days immediately generated two strong expectations: first, a global procurement wave is likely to emerge, benefiting Taiwan’s exports as a key part of the global supply chain; second, the IMF unexpectedly raised Taiwan’s economic growth forecast, coupled with a stellar performance of the Taiwan stock market. These positive news items drove foreign capital to flood in, forming the first powerful momentum behind the NTD’s appreciation.

Second Layer: Concentrated Release of Structural Risks

According to the latest UBS research report, the 5% single-day appreciation on May 2 exceeded what traditional economic indicators could explain. The report highlights an important structural issue: Taiwan’s life insurance industry holds up to US$1.7 trillion in overseas assets (mainly US Treasuries), yet has long lacked sufficient currency hedging measures.

Historically, Taiwan’s central bank has been able to effectively suppress sharp NTD appreciation, but in the current international environment, it faces the aforementioned dilemma. This has led Taiwanese insurers to initiate “panic” hedging operations, with large-scale currency hedging transactions and concentrated unwinding of NTD financing arbitrage jointly triggering this exchange rate movement. UBS warns that if foreign exchange hedging scales return to trend levels, it could trigger about US$100 billion in dollar selling pressure, equivalent to 14% of Taiwan’s GDP.

Third Layer: Technical Oversold Rebound

Historical experience shows that similar large single-day increases often originate from extremely crowded contrarian positions. When these positions are unwound en masse, it creates a self-reinforcing appreciation spiral.

Limited Future Space for USD/NTD, 28 Yuan as a Firm Support Level

Valuation Models Indicate Appreciation Nearing Limits

A key reference for assessing exchange rate fairness is the BIS’s real effective exchange rate index (REER). As of the end of March:

• The US dollar index is around 113, indicating significant overvaluation
• The NTD index remains around 96, suggesting it is reasonably undervalued
• In comparison, the Japanese yen index is only 73, and the Korean won index is 89, indicating more pronounced undervaluation among major Asian export currencies

UBS’s valuation model shows that the NTD has shifted from moderate undervaluation to a level exceeding fair value by 2.7 standard deviations. In other words, according to the valuation model, the NTD’s upside appreciation potential is quite limited.

Regional Currencies’ Performance Is Generally Synchronized

If we extend the observation period from the recent abnormal volatility to the year-to-date, the appreciation of the NTD is roughly in line with regional peers:

• NTD up 8.74%
• JPY up 8.47%
• KRW up 7.17%

From a longer-term perspective, the trend of the NTD remains synchronized with overall Asian currency movements; the recent rapid appreciation is merely part of this regional currency rally.

28 Yuan as a Market Consensus Bottom

Most industry insiders believe that the possibility of the NTD reaching 28 per US dollar is very low. The market generally expects that when the trade-weighted index of the NTD rises by another 3% (approaching the central bank’s tolerance limit), authorities may increase intervention to stabilize fluctuations. Although the FX derivatives market shows the “strongest appreciation expectation in five years,” it does not break the consensus that 28 remains a key threshold.

Lessons from 30 Years of USD/NTD Exchange Rate History

Relatively Moderate Volatility in the Past Decade

From October 2014 to October 2024, the USD/NTD exchange rate fluctuated between 27 and 34, with a total range of 23%. Compared to global currencies, this is relatively low volatility. In contrast, the Japanese yen, considered a safe-haven currency, experienced a 50% fluctuation during the same period (from 99 to 161), twice as volatile as the NTD.

Exchange Rate Trends Mainly Driven by US Cycle

Since Taiwan’s interest rates have only fluctuated modestly, the exchange rate movements are primarily driven by US Federal Reserve policy cycles.

• 2015 to mid-2018: China stock market crash and European debt crisis, US slowed quantitative tightening and continued easing, leading to a strengthening of the NTD
• Post-2018: US began rate hikes, aiming to maintain high interest rates and shrink its balance sheet
• 2020 pandemic outbreak: Fed expanded its balance sheet from US$4.5 trillion to US$9 trillion, rates cut to zero, causing the dollar to depreciate sharply, with the NTD reaching 27
• Post-2022: US inflation spiraled out of control, Fed accelerated rate hikes, dollar strengthened again, and the NTD hovered around 32
• After September 2024: Fed ended the rate hike cycle and began cutting rates, with the exchange rate returning to around 32

Market Consensus on the Decade’s Equilibrium Point

Based on the past decade’s fluctuations, the market has formed a “common yardstick” — 30. Most investors believe that USD below 30 is a good buy, above 32 should be sold. These two levels serve as important reference points for long-term currency investment.

Practical Strategies to Capture the NTD Appreciation Opportunity

For Experienced Investors

You can directly trade USD/NTD or related currency pairs in the forex market to capture short-term or intraday volatility. If you already hold USD assets, you can use derivatives like forward contracts to hedge, locking in gains from NTD appreciation.

For New Traders

First, remember to start small and test the waters; avoid impulsive leverage increases. A single loss of control can end your trading career. It’s recommended to begin with low leverage when trading USD/NTD, always setting stop-loss points to protect yourself. Many trading platforms offer demo accounts, which are excellent tools for practicing and testing strategies.

Long-term Asset Allocation and Risk Management Principles

Taiwan’s economic fundamentals remain solid, with robust semiconductor exports. The NTD may fluctuate within a range of 30 to 30.5 for the long term. However, for long-term investing, remember an important principle: keep foreign exchange positions within 5%-10% of total assets, and diversify remaining funds into other global assets to effectively control overall risk.

Continuously Monitor Key Variables

Stay updated on the latest moves by Taiwan’s central bank and developments in US-Taiwan trade negotiations, as these will directly influence USD/NTD trends. It’s advisable to combine currency strategies with investments in Taiwan stocks or bonds to make your portfolio more balanced, maintaining overall risk control even amid currency fluctuations.