NTD to USD Trend Forecast: From a Surge in 2025 to Investment Strategies in 2026

The Taiwanese dollar showed remarkable appreciation momentum in May 2025, soaring nearly 10% in just two trading days, breaking the 30 NT dollar psychological barrier and recording the largest single-day gain in 40 years. By early 2026, the USD/TWD trend has become a focal point in the Asian currency market. Is this wave of appreciation a fleeting phenomenon or the beginning of a long-term trend? How can investors seize opportunities amid volatility? This article provides a comprehensive analysis of the USD/TWD outlook, covering policy drivers, structural risks, and technical assessments to support multi-dimensional investment decisions.

The Three Drivers of TWD Appreciation: Policy, Structure, and Market Sentiment

The appreciation of the TWD in May 2025 was not accidental but the result of multiple factors converging.

First Layer: Direct Catalyst from U.S. Policy Shift

The Trump administration announced a reciprocal tariff policy, delaying implementation by 90 days, which became the main trigger for TWD appreciation. Expectations of a global procurement surge improved Taiwan’s export outlook, and the International Monetary Fund (IMF) unexpectedly raised Taiwan’s economic growth forecast. These positive news flows attracted substantial foreign investment, forming the initial wave of NTD appreciation. Notably, the Trump administration’s “Fair and Reciprocal Trade Plan” explicitly prioritized “currency intervention” for review, creating new market expectations about the central bank’s future policy space.

Second Layer: Structural Dilemma of the Central Bank

Taiwan’s central bank faces a dilemma. As a typical export-oriented economy, it is highly sensitive to exchange rate fluctuations. Meanwhile, traditional intervention tools may be limited by international political considerations. Taiwan’s first-quarter trade surplus reached $23.57 billion, up 23% year-on-year, with the surplus against the U.S. soaring 134% to $22.09 billion. The large surplus exerts ongoing upward pressure on the TWD. Central Bank Governor Yang Chin-long clarified in an emergency press conference that the bank did not intervene in the forex market, but this statement itself reflects the policy challenge—balancing the need to curb appreciation while avoiding accusations of currency manipulation internationally.

Third Layer: Hedging Operations Amplifying Volatility

UBS’s research reveals the internal mechanism behind the TWD’s sharp rise in May 2025: large-scale hedging by Taiwanese insurers and exporters, along with concentrated unwinding of NTD financing arbitrage trades, jointly catalyzed this abnormal volatility. Taiwanese life insurers hold up to $1.7 trillion in overseas assets but lack sufficient hedging measures. This exposes a structural risk—when the central bank cannot effectively suppress TWD appreciation as before, this risk concentrates. The Financial Times noted that “defensive” hedging by Taiwanese insurers became a major driver of the currency surge. UBS warns that when the NTD retraces, insurers and exporters may further increase hedging, potentially selling up to $100 billion in dollars, equivalent to 14% of Taiwan’s GDP.

Assessing Exchange Rate Fairness: How to Read the REER Index

The key to predicting USD/TWD movement lies in accurately assessing the current exchange rate’s fairness. The Bank for International Settlements (BIS) provides an objective reference through the Real Effective Exchange Rate (REER) index. An index value of 100 indicates equilibrium; above 100 suggests possible overvaluation, below 100 indicates undervaluation.

As of the end of March 2025, the USD’s REER was approximately 113, indicating a significant overvaluation; meanwhile, the TWD’s index hovered around 96, in a “fairly undervalued” zone. In comparison, regional currencies like the Japanese Yen and Korean Won were more undervalued—73 and 89 respectively.

Extending the observation period through 2025, the cumulative appreciation of TWD against USD was aligned with that of JPY and KRW: TWD up 8.74%, JPY up 8.47%, KRW up 7.17%. Despite recent rapid gains, the regional currency trends do not appear abnormal.

UBS’s valuation models show that the TWD has shifted from moderate undervaluation to a fair value exceeding the mean by 2.7 standard deviations. The foreign exchange derivatives market reflects the “strongest appreciation expectation in five years,” indicating a significant increase in market optimism about further TWD appreciation.

When Will the TWD Rally End? Market Consensus and Risk Warnings

Will the TWD continue to strengthen? Industry consensus suggests the upward momentum remains, but the scope for further gains is narrowing.

Where is the Appreciation Limit?

Most experts believe it’s unlikely the TWD will reach 28 per USD. Current market expectations for further appreciation generally hover between 29.5 and 30. The UBS notes that when the trade-weighted index approaches the central bank’s tolerance limit with a 3% increase, authorities may intervene more actively to stabilize volatility.

Lessons from History

Over the past decade (October 2014 to October 2024), the USD/TWD exchange rate fluctuated between 27 and 34, a 23% range. Compared to the 50% volatility of safe-haven currencies like the Yen (from 99 to 161), TWD’s swings are relatively moderate. This stability means that when daily gains exceed 10%, the risk of correction increases.

Between 2015 and 2018, as the U.S. slowed its quantitative tightening (QT) and continued quantitative easing, the TWD appreciated. After 2018, as the Fed began rate hikes, the appreciation slowed. The COVID-19 pandemic in 2020 prompted the Fed to expand its balance sheet from $4.5 trillion to $9 trillion, with rates dropping to zero, causing the USD to weaken and the TWD to surge past 27. Later, in 2022, the Fed’s aggressive rate hikes due to inflation strengthened the dollar again, reversing the trend. By September 2024, after the Fed ended its rate-hike cycle and started cutting rates, the USD/TWD returned to around 32.

Practical Investment Strategies Amid Volatility

Investors should adopt differentiated strategies based on their experience and risk appetite.

For Experienced Forex Traders:

Consider engaging directly in USD/TWD or related currency pairs on forex platforms for short-term trading, capturing daily or intra-day volatility. If holding USD assets, use forward contracts or derivatives to lock in gains ahead of time. Always set clear stop-loss levels, limiting risk per trade to 2-3% of total capital.

For Novice Investors:

Start with demo accounts to practice and test strategies before live trading. Use small positions initially, strictly follow position sizing rules to avoid impulsive over-leverage. Many platforms like Mitrade offer low leverage and small minimum investments, suitable for beginners. Keep a close eye on actions by Taiwan’s central bank and developments in US-Taiwan trade negotiations, as these will directly influence exchange rates.

For Long-term Investors:

Taiwan’s fundamentals remain solid, with strong semiconductor exports supporting the TWD. Expect the currency to oscillate around 30 to 30.5 in the long run. Maintain FX exposure within 5-10% of total assets, diversifying remaining holdings into global equities and bonds to reduce overall portfolio risk.

Use low leverage for USD/TWD positions and consider investing in Taiwanese stocks or bonds to enhance portfolio resilience. Even amid sharp currency swings, overall returns can remain relatively stable.

A Decade in Review and Long-Term Perspective: The Historical Trajectory of TWD/USD

Understanding the long-term outlook requires reviewing the past decade’s exchange rate evolution.

Since 2015, the TWD’s movements have largely been driven by Fed policy cycles. During the 2015–2018 Chinese stock market crash and Eurozone crisis, the Fed slowed QT and continued easing, strengthening the TWD. Post-2018, as the U.S. economy improved and the Fed began rate hikes, the appreciation slowed. The COVID-19 pandemic in 2020 led to massive Fed asset expansion, with the dollar weakening and the TWD surpassing 27. This period marked one of the fastest appreciation phases among Asian currencies. However, this trend was not sustained—by 2022, the Fed’s aggressive rate hikes due to inflation caused the dollar to strengthen again, reversing the appreciation.

After the 2008 financial crisis, the Fed launched three rounds of quantitative easing. In December 2013, when the Fed announced tapering QE3, U.S. interest rates rose, capital flowed back to the U.S., and the USD/TWD climbed from lows around 27 to 33, remaining elevated until September 2024, when the Fed began cutting rates again.

Market Reference Points

Over the past decade, a common “benchmark” level has emerged around 30. When USD/TWD falls below 30, it’s often seen as a buying opportunity for USD assets; above 32, some consider reducing exposure. These points serve as tactical reference levels for long-term FX positioning.

Looking ahead, the TWD’s trajectory will continue to depend on Fed policies, US-China trade relations, and global economic data. By early 2026, the consensus is that “there is still room for appreciation, but risks are mounting.” Given increasing central bank constraints, concentrated hedging activities, and technical overvaluation, investors should seize opportunities cautiously while managing risks prudently.