USD Exchange Rate Trend Chart: A Decade Review and Investment Insights from TWD's Rise from Low to Breaking 30 Yuan

Ten-Year USD Exchange Rate Cycle Review: Why the New Taiwan Dollar Stands Out

Over the past decade (October 2014 to October 2024), the USD/TWD exchange rate fluctuated between 27 and 34, with an overall volatility of about 23%. In comparison, the JPY/USD volatility reached as high as 50% (exchange rate between 99 and 161), highlighting the relative stability of the Taiwan dollar. This stability is not a coincidence but stems from the Taiwan Central Bank’s long-term moderate interest rate policies and solid economic fundamentals.

However, this “stability” has recently been broken. In early 2025, a series of geopolitical and trade policy changes triggered an unprecedented rapid appreciation of the TWD, with a nearly 10% increase over just two trading days, pushing the USD/TWD from around 32 to a new high of 29.59.

From Central Bank Constraints to Market Sentiment Reversal: Three Forces Behind the TWD Appreciation

Trade policy shifts are the ignition trigger

The US government’s adjustment of tariff policies, including a 90-day delay in implementing reciprocal tariffs, immediately sparked two major market expectations: global companies will initiate concentrated procurement waves, benefiting Taiwan as a key supplier in the short term; simultaneously, the International Monetary Fund unexpectedly raised Taiwan’s economic growth forecast. These optimistic signals attracted significant net foreign investment inflows, becoming the first wave of upward momentum for the New Taiwan Dollar.

Central bank policy space compressed

Deeper issues lie in the US government’s “Fair and Reciprocal Plan,” which explicitly emphasizes currency intervention review. Taiwan’s central bank faces a dilemma—if it intervenes forcefully as in the past, it risks being accused of currency manipulation; if it does not intervene, it cannot control excessive exchange rate fluctuations. This policy dilemma is fully reflected in the market, further fueling appreciation expectations.

Financial institutions’ hedging operations trigger chain reactions

A UBS research report reveals another key factor: Taiwan’s insurance industry holds up to 1.7 trillion USD in overseas assets (mainly US Treasuries) but has long lacked sufficient currency hedging. When appreciation expectations emerge, these institutions’ concentrated hedging activities, combined with exporters’ position unwinding, create an irrational positive feedback loop. UBS warns that restoring foreign exchange hedging to trend levels could trigger about 100 billion USD in selling pressure, equivalent to 14% of Taiwan’s GDP.

USD Exchange Rate Trend Chart Perspective: How Much Room Is Left for TWD Appreciation?

Valuation model signals

The BIS’s real effective exchange rate index(REER) provides a key reference. With an equilibrium value of 100, the latest data as of the end of March shows:

• USD index at 113, indicating a significant overvaluation
• New Taiwan dollar index around 96, in the “reasonably undervalued” zone

This suggests that the TWD still has room for further appreciation, but the extent may be limited. In contrast, the Japanese Yen(73) and Korean Won(89) are more notably undervalued, reflecting a broader regional currency appreciation expectation in Asia.

Regional Benchmark Insights

Expanding the observation scope from recent abnormal fluctuations to the entire year reveals a clearer picture:

• TWD appreciation since the start of the year: 8.74%
• JPY appreciation in the same period: 8.47%
• KRW appreciation in the same period: 7.17%

Regional currencies are generally moving in sync, indicating that the rapid appreciation of the TWD is not an isolated phenomenon but part of a collective regional trend under certain policy cycles.

Central bank tolerance and market expectations tug-of-war

UBS’s latest analysis indicates that the New Taiwan Dollar has shifted from being moderately undervalued to a fair value that is 2.7 standard deviations higher. FX derivatives markets show the “strongest appreciation expectation in five years,” but historical experience suggests that large single-day gains are not immediately reversed. UBS expects that when the trade-weighted index of the TWD rises another 3% (approaching the central bank’s tolerance limit), official interventions will intensify to smooth volatility. The 28-level barrier is widely considered difficult to break, implying market expectations for further appreciation are becoming more rational.

Historical Logic of the FED Policy Cycle and USD Exchange Rate Trends

The long-term trend of the TWD mainly depends on Federal Reserve policies, not Taiwan’s central bank. Reviewing the past decade’s two key cycles:

Easing Cycle (2015-2020): The Fed launched quantitative easing and maintained low interest rates, leading to a weaker dollar and an appreciating TWD. During the 2020 pandemic, the Fed’s balance sheet expanded from USD 4.5 trillion to USD 9 trillion, with the TWD reaching a record high of 27 per USD.

Tightening Cycle (2022-2024): Due to runaway inflation, the Fed began rapid rate hikes, causing the USD to strengthen significantly, and the TWD depreciated. The exchange rate hovered between 30 and 32. Until September 2024, when the Fed ended its high-interest cycle and started cutting rates, the TWD regained upward momentum.

This cyclical pattern suggests that investors should focus more on the Fed’s policy shifts than short-term fluctuations.

Currency Operation Strategies for Different Risk Preference Investors

Advanced traders’ strategies

Experienced forex traders with high risk tolerance may consider two approaches:

• Short-term trading of USD/TWD and related currency pairs on forex platforms to capture daily or intra-day volatility
• If holding USD assets, using forward contracts and other derivatives to lock in appreciation benefits in advance

Conservative paths for novice investors

Beginners should keep in mind when facing recent volatility:

• Start with small amounts to test trading psychology
• Avoid impulsive position increases; maintaining a stable mindset is more important than high returns
• Use demo account features to practice and verify trading strategies

Long-term holders’ allocation advice

For investors mainly holding positions:

• TWD may remain in a range of 30 to 30.5 for an extended period, with a relatively strong long-term outlook
• FX positions should be controlled at 5%-10% of total assets; remaining funds should be diversified into stocks, bonds, and global assets to reduce systemic risk
• Use low leverage and set strict stop-loss points; regularly monitor Taiwan’s central bank actions and US-Taiwan trade negotiations

Building a Rational USD Exchange Rate Investment Framework

Although short-term fluctuations can be dazzling, the historical USD exchange rate chart teaches us a simple truth: markets will eventually seek equilibrium. Over the past decade, a “psychological price level” has formed—most investors see below 30 as a good buying point, while above 32 they consider cashing out.

Whether engaging in short-term trading or long-term holding, discipline, risk control, and tracking policy changes are timeless principles. The process of the TWD moving from sluggishness to appreciation fundamentally reflects the market’s renewed recognition of Taiwan’s economic fundamentals—robust semiconductor exports, expanding trade surpluses, and flexible central bank policies—all providing solid support for the TWD.