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The exchange rate between the Chinese Yuan (CNY) and the New Taiwan Dollar (TWD) is a critical indicator of the economic relationship between China and Taiwan. Over the past few months, this rate has exhibited notable fluctuations, influenced by various economic and geopolitical factors. This report provides an analysis of the recent trends, underlying causes, and potential future movements of the CNY/TWD exchange rate.

Recent Trends in the CNY/TWD Exchange Rate

Between September 2024 and March 2025, the CNY/TWD exchange rate experienced significant variability. The highest recorded rate during this period was 4.5964 TWD per CNY on October 6, 2024, while the lowest was 4.4430 TWD per CNY on January 20, 2025. The average exchange rate over these six months was approximately 4.5075 TWD per CNY.

In the first quarter of 2025, the exchange rate demonstrated a gradual upward trend. For instance, on March 28, 2025, the rate closed at 4.5686 TWD per CNY, marking a 0.34% increase from the previous day. This upward movement suggests a strengthening of the Chinese Yuan relative to the New Taiwan Dollar during this period.

Factors Influencing the Exchange Rate Movements

Several factors have contributed to the observed fluctuations in the CNY/TWD exchange rate:

1. Economic Indicators: Differences in economic performance between China and Taiwan, such as GDP growth rates, inflation, and trade balances, can impact currency valuations.

2. Monetary Policies: Decisions by the People's Bank of China and the Central Bank of the Republic of China (Taiwan) regarding interest rates and monetary supply influence investor confidence and capital flows, affecting the exchange rate.

3. Geopolitical Events: Tensions or cooperation between China and Taiwan, as well as broader regional developments, can lead to shifts in investor sentiment, impacting currency demand and supply.

4. Global Market Dynamics: External factors, including global economic conditions and currency market trends, also play a role in determining the CNY/TWD exchange rate.

Forecasts and Future Outlook

Looking ahead, forecasts suggest a modest appreciation of the Chinese Yuan against the New Taiwan Dollar. Projections for the end of 2025 estimate an average exchange rate of approximately 4.4573 TWD per CNY, with a range between 4.4484 and 4.4661. By the end of 2026, the average rate is expected to be around 4.4927 TWD per CNY, ranging from 4.4794 to 4.5060.

These projections are based on anticipated economic growth in China, potential shifts in trade policies, and expected monetary policy adjustments by both countries. However, it's important to note that exchange rate forecasts are subject to uncertainties, including unforeseen economic developments and geopolitical events.

Implications for Stakeholders

The fluctuations in the CNY/TWD exchange rate have several implications:

• Businesses: Companies engaged in cross-strait trade must consider exchange rate risks in their pricing and financial planning.

• Investors: Currency movements can affect the returns on investments denominated in CNY or TWD, necessitating strategies to hedge against potential losses.

• Policymakers: Understanding the factors driving exchange rate changes is crucial for formulating effective economic and monetary policies.

Conclusion

The CNY/TWD exchange rate has exhibited notable fluctuations over the past few months, influenced by a complex interplay of economic indicators, monetary policies, geopolitical events, and global market dynamics. While forecasts suggest a modest appreciation of the Chinese Yuan against the New Taiwan Dollar in the near future, stakeholders should remain vigilant and consider the inherent uncertainties in exchange rate movements.