Will the Taiwanese dollar appreciate or depreciate in 2026? Latest exchange rate trend analysis and investment guide

The rise and fall of the New Taiwan Dollar (NTD) has always influenced many investors’ hearts. Over the past year, the NTD exchange rate has experienced unprecedented volatility in decades, from panic over depreciation to sudden surges breaking through resistance levels, with market sentiment fluctuating wildly. Will the NTD appreciate or depreciate in the future? How can investors find opportunities amid these waves of volatility? This article will analyze the driving factors behind the NTD exchange rate from multiple perspectives and offer practical investment advice.

Why Is the NTD Exchange Rate So Volatile? The Most Dramatic Fluctuations in History

Looking back over the past decade, the NTD against the US dollar has fluctuated between 27 and 34, a range of 23%. In comparison, the Japanese yen, once considered a safe-haven currency, has experienced a 50% fluctuation (from 99 to 161 USD/JPY), indicating that the NTD has relatively stronger stability.

However, recent performance has shattered this calm. Within just a few trading days, the NTD surged nearly 10%, setting the largest single-day gain in 40 years, breaking the psychological 30-dollar mark, and reaching a high of 29.59 during trading. This surge not only broke multiple historical records but also triggered the third-largest trading volume in the history of forex markets.

Meanwhile, other major Asian currencies also appreciated. The Singapore dollar rose 1.41%, the Japanese yen gained 1.5%, and the Korean won surged 3.8%. Yet, such explosive appreciation as seen with the NTD is unique among Asian currencies. Behind this abnormal performance lie complex economic and political factors.

The Invisible Tug-of-War Between the Central Bank and the U.S.: Complex Factors Behind the NTD Appreciation

Ripple Effects of U.S. Policy Changes

U.S. government tariff policies have been a key trigger for this wave of NTD appreciation. Following policy announcements, two strong market expectations emerged: first, a global procurement wave benefiting Taiwan as a typical export-oriented economy; second, the IMF unexpectedly raising Taiwan’s economic growth forecasts, coupled with stellar performance of the Taiwan stock market. These positive news flows attracted massive foreign capital inflows, fueling the first wave of the NTD’s rally.

The Dilemma Facing the Central Bank

In this critical moment of appreciation, the central bank’s response has puzzled the market. Although emergency statements were issued, their language was vague on the most pressing issue—intervention. The U.S. government’s “Fair and Reciprocal Trade Policy” explicitly emphasizes “currency intervention” as a focus of review, implying that Taiwan’s central bank may find it difficult to intervene forcefully as in the past. This concern is not unfounded—Taiwan’s trade surplus in the first quarter reached $23.57 billion, up 23% year-on-year, with the surplus against the U.S. soaring 134% to $22.09 billion. Without the central bank’s stabilizing measures, the NTD indeed faces significant upward pressure.

Passive Hedging Operations by Financial Institutions

UBS’s latest research indicates that this wave of exchange rate volatility exceeds explanations based on traditional economic indicators. Besides market sentiment, large-scale FX hedging operations by Taiwanese insurers and corporations to manage uncertainty, along with concentrated unwinding of NTD financing arbitrage trades, have amplified this currency movement. UBS warns that when the NTD retraces, insurers and exporters may further increase hedging ratios, and restoring FX hedging to trend levels alone could generate about $100 billion in USD selling pressure—equivalent to 14% of Taiwan’s GDP. This potential risk warrants close attention.

How Low Will the NTD Go? Expert Predictions and Risk Warnings

What Is the Ceiling for Appreciation?

Most market participants believe that the NTD is unlikely to reach 28 USD/TWD. When assessing exchange rate fairness, the BIS’s real effective exchange rate (REER) index is a key reference. An index above 100 suggests overvaluation; below 100 indicates undervaluation. Currently, the USD index is around 113, indicating a significant overvaluation of the dollar, while the TWD index hovers around 96, suggesting it is reasonably undervalued. Notably, other major Asian export currencies are even more undervalued—JPY and KRW indices are at 73 and 89, respectively.

Comparing with Regional Peers Over Time

Extending the observation period from recent abnormal swings to year-to-date, the cumulative appreciation of the NTD (8.74%) is similar to that of the JPY (8.47%) and KRW (7.17%). This indicates that, despite the recent rapid appreciation, the longer-term trend aligns with regional currencies, not a unique phenomenon.

UBS’s Key Views on the Future

Based on UBS’s multi-dimensional analysis, the NTD’s appreciation trend may continue. First, valuation models show the NTD has shifted from moderate undervaluation to a fair value exceeding the mean by 2.7 standard deviations. Second, FX derivatives markets show the “strongest appreciation expectations in five years.” Third, historical experience suggests that large single-day gains are rarely followed by immediate reversals. UBS advises investors not to prematurely take contrarian positions but expects that when the trade-weighted index of the NTD rises another 3%, the authorities may step up intervention to smooth volatility.

What to Do with Your USD? Practical Investment Strategies for Currency Fluctuations

For Experienced Forex Traders

If you have deep understanding of FX markets and high risk tolerance, consider two strategies: first, short-term trading of USD/TWD or related currency pairs on forex platforms to capture daily or intraday swings; second, if you already hold USD assets, use derivatives like forward contracts to hedge and lock in gains from the NTD’s appreciation.

For Market Novices

If you want to follow the trend but lack experience, remember these principles: start with small amounts, avoid impulsive over-leverage, and don’t chase after quick gains to prevent emotional decision-making. Many trading platforms offer demo accounts—use these to practice trading strategies before risking real money.

For Long-term, Conservative Investors

Given Taiwan’s solid economic fundamentals and promising semiconductor export outlook, the NTD may oscillate within a long-term range of 30 to 30.5. For long-term asset allocation, it’s advisable to limit FX exposure to 5-10% of total assets, diversifying into global assets to reduce risk concentration.

Use low leverage when trading USD/TWD, set stop-loss orders to protect capital, and stay informed about Taiwan’s central bank policies and U.S.-Taiwan trade negotiations, as these will directly influence future exchange rate movements. Diversify investments by including Taiwanese stocks or bonds to mitigate risks from currency fluctuations.

Historical Perspective: Lessons from a Decade of NTD Exchange Rate Movements

Over the past decade (October 2014 to October 2024), the NTD/USD has oscillated between 27 and 34, a 23% range, relatively stable compared to other global currencies. This stability mainly stems from modest interest rate fluctuations in Taiwan, with the exchange rate primarily driven by U.S. Federal Reserve policies.

2015–2018: Loose Monetary Policy Period

During China’s stock market crash and European debt crisis, the Fed slowed its tapering and continued easing, strengthening the NTD. After 2018, as the U.S. aimed to improve the economy with rate hikes and balance sheet reduction, the NTD faced upward pressure. The COVID-19 pandemic in 2020 prompted the Fed to expand its balance sheet nearly twofold, further supporting the NTD’s appreciation.

2020–2022: Aggressive Easing and High-Interest Era

From 2020 to 2022, the Fed’s balance sheet grew from $4.5 trillion to $9 trillion, with interest rates dropping to zero. The USD depreciated sharply, and the NTD appreciated, reaching around 27 to 28 per USD. However, in 2022, U.S. inflation soared, forcing the Fed to rapidly hike rates, causing the USD to strengthen again and the exchange rate to stabilize within a narrower range.

The Three Rounds of Quantitative Easing and Current Situation

Since the 2008 financial crisis, the Fed launched three rounds of QE. In December 2013, it announced tapering, leading to rising U.S. interest rates and capital flows back to the U.S., pushing USD/NTD from lows to around 33. By September 2024, after ending the current rate hike cycle, the exchange rate gradually returned to around 32.

Investor Sentiment Indicators and Decision-Making

Over the past decade, a common “psychological scale” has formed among market participants. Many believe USD below 30 is attractive and worth buying, while above 32, it’s prudent to reduce holdings. For long-term FX investments, these ranges can serve as reference points, but always consider personal risk appetite and investment horizon.

Regarding whether the NTD will appreciate or depreciate, the short answer is: in the near term, the appreciation trend may continue but with limited room; medium to long term, the trend depends on U.S. policies, global trade patterns, and Taiwan’s economic performance. The key is thorough risk management to protect assets and seek reasonable gains amid currency fluctuations.