Exchange Rate Calculator

The exchange rate between the Taiwanese Dollar (TWD) and the US Dollar (USD) has experienced notable fluctuations over the past few months, influenced by various economic factors and market dynamics. This report provides an analysis of the recent trends, underlying causes, and potential implications of these movements.

Recent Exchange Rate Trends

In early May 2025, the TWD experienced a significant appreciation against the USD, marking its highest valuation since mid-2022. At one point, the exchange rate dropped below 30 TWD per USD, indicating a substantial strengthening of the Taiwanese currency. This rapid appreciation led to heightened trading activity, with volumes reaching levels not seen since the 2008 financial crisis. (ft.com)

Prior to this surge, the TWD had been relatively stable, with minor fluctuations influenced by routine market factors. However, the abrupt rally in May 2025 marked a departure from this stability, prompting concerns and discussions among market participants and policymakers.

Factors Contributing to TWD Appreciation

Several factors have contributed to the recent appreciation of the TWD:

1. Trade Policy Changes: The appreciation was initially triggered by tariff changes implemented on April 2, 2025. These changes influenced trade balances and capital flows, leading to increased demand for the TWD. (ft.com)

2. Life Insurers' Currency Exposure: Taiwanese life insurance companies have substantial investments in US dollar-denominated assets, with significant portions unhedged. As the TWD appreciated, these insurers faced potential losses, prompting them to adjust their positions, thereby exerting additional upward pressure on the TWD. (ft.com)

3. Central Bank's Stance: The Central Bank of the Republic of China (Taiwan) has not actively intervened to curb the TWD's appreciation, leading to speculation that the currency's valuation might be influenced by broader trade negotiations. (ft.com)

Impact on Financial Markets

The rapid appreciation of the TWD has had several implications for financial markets:

• Life Insurance Companies: Major insurers like Cathay Financial Holding and Fubon Financial Holding experienced significant stock price declines, falling 6.8% and 5.9% respectively, due to their exposure to unhedged US dollar assets. (ft.com)

• Formosa Bond Market: Taiwan's life insurers have been significant participants in the Formosa bond market, which involves US dollar-denominated bonds issued in Taiwan. The appreciation of the TWD and rising US interest rates have led to a decline in new Formosa bond issuances, potentially increasing US interest rate volatility and mortgage costs in the long term. (ft.com)

Technical Analysis

As of March 28, 2025, technical indicators for the TWD/USD pair suggested a strong sell signal:

• Relative Strength Index (RSI): At 32.626, indicating a sell signal.

• Moving Averages: All short-term moving averages (MA5, MA10, MA20, MA50) were below the current price, suggesting a bearish trend. (investing.com)

These indicators reflect the market's bearish sentiment towards the TWD against the USD during that period.

Forecasts and Outlook

According to forecasts updated in March 2025, the TWD/USD exchange rate was expected to experience slight fluctuations over the following months:

• April 2025: 33.09 TWD per USD

• May 2025: 32.83 TWD per USD

• June 2025: 32.57 TWD per USD

These projections indicate a gradual strengthening of the TWD against the USD. (forecasts.org)

Conclusion

The recent appreciation of the TWD against the USD has been driven by a combination of trade policy changes, financial market dynamics, and the strategic positions of major financial institutions. While the immediate effects have been significant, particularly for life insurers and the Formosa bond market, the long-term implications will depend on future policy decisions, market responses, and global economic conditions. Market participants should closely monitor these developments to navigate the evolving currency landscape effectively.