USD to TWD Forecast

USD to TWD history

Taiwan and the US have had trade ties for decades. The US dollar was established in the 1800s while the new Taiwan dollar was created in 1949. At the time, it replaced the old Taiwan dollar, which was plagued by hyperinflation of the time.

Today, Taiwan has emerged as an economic powerhouse because of its strong industrial base. It is mostly known for its semiconductor industry, which is the backbone of the modern economy.

In terms of market cap, Taiwan’s Semiconductor Manufacturing Company is the second-biggest semiconductor manufacturer in the world after Nvidia. It has become one of the most important companies in the world because it innovated the fabless foundry concept in 1987 and manufactures most of the chips we use today.

The US and Taiwan have strong economic relations. Data from the Commerce Department showed that the total trade volume of the two countries stands at over $120 billion. The US exports to the country are worth about $47.3 billion while imports are worth over $86 billion. This leaves the total trade deficit at about $40 billion.

The USD/TWD has been a relatively stable currency over the years. It peaked at 40.59 in 1985 and then reached an all-time low of 24.50 in 1992. As shown below, since 1999, the pair has remained between the support at 27.27 and the resistance at 35.25. This is a relatively small standard deviation compared to other currencies.

Its stability is likely because the USD/TWD is not a popular pair among speculators. Therefore, its price action is mostly determined by supply and demand dynamics, which are affected by the overall trade volume between the two countries.

Latest USD to TWD forecast

The Taiwan dollar, like other global currencies, declined sharply against the US dollar in 2022. The USD/TWD rose to a high of 32.41 in October from January’s low of 27.40. This rally happened as the US dollar index surged to the highest level in over two decades because of the hawkish tone of the Federal Reserve.

The Fed hiked interest rates from near zero in January to over 4% by December 2022 as America’s inflation surged to its highest level in over four decades. It also decided to start its quantitative tightening policy in a bid to lower inflation.

Taiwan, on the other hand, did not have a major challenge of inflation. Between 2020 and 2021, the country was going through a period of deflation. In August 2022, the headline consumer inflation peaked at 3.59% in June as oil and gas prices surged.

Like other central banks, Taiwan’s central bank made several rate hikes in 2022 in a bid to cool prices. In March, it implemented the biggest rate hike since 2007. It managed to move interest rates from about 1% to 1.75% in December. It then pointed out that it will take a strategic pause as it expected inflation to gradually hit its target.

US and Taiwan interest rates spread

The USD to TWD pair has risen in February as investors spot a carry trade opportunity. A carry trade is a situation where investors borrow from a low-yielding country (like Taiwan) to invest in a higher-yielding one like the US. The idea is that the spread between interest rates in the two countries will continue to widen in the coming months.

This view is supported by the strong economic numbers from the United States. The country’s unemployment rate dropped to a multi-decade low of 3.4%. Inflation, on the other hand, remains stubbornly above 2%. Retail sales have also jumped, signaling that Americans are doing well even as interest rates have risen.

Therefore, there is a likelihood that the Fed will continue hiking interest rates in 2023. Analysts at Goldman Sachs and Bank of America believe that the Fed will hike rates until June this year. If this happens, the USD to TWD pair will likely continue soaring in the next few months.

China and US tensions

The other important catalyst for the USD/TWD pair is the growing tensions between the United States and China. China has always insisted that Taiwan is part of it. In 2022, tensions between the US and China rose after House Speaker Nancy Pelosi visited Taiwan.

These tensions will likely go on for a while since China is still determined to reunite with Taiwan. Still, it is not clear whether China will launch an attack on Taiwan. Some analysts believe that the attack will happen in 2027 when China completes modernizing its military. When it does, we could see the USD to TWD pair rise as investors rush to the USD.

USD to TWD technical analysis

The USD/TWD pair peaked at 32.41 in October 2022. It then started moving downwards and reached a low of 29.66 in February. This decline happened due to the downward trend of American inflation. The pair then pulled back after the strong US published strong data on inflation, jobs, and retail sales in February.

It has moved slightly below the 38.2% Fibonacci Retracement level and is consolidating at the 25-day and 50-day moving averages. The Relative Strength Index (RSI) has moved above the neutral point of 50 and is nearing its overbought level.

Still, this recovery is expected to be brief, with the pair set to resume its bearish trend to the support at 28.50.

Transferring USD to TWD

The volume of USD and TWD traded on a given day is substantial and is estimated to be worth over $90 billion per year. As a result, there are numerous easy ways for sending funds from the US to Taiwan and vice versa.

A common approach to observe the currency transfer is to use a wire transfer, which is the process of asking a bank to deposit funds into another bank account based in a separate country. The process takes a few minutes to do, and in most cases, funds take a day or two to arrive in Taiwan and vice versa.

There are other money transfer services that can be used such as XE, Wise, MoneyGram, Western Union, and Ria Money Transfer.

In all, the money transfer fees in these transactions are usually a bit minimal. The best way is to use a money transfer comparison site and go with the cheaper option.

Is it a good time to buy USD with TWD?

Yes, it is a good time to buy USD with TWD because the USD has become relatively cheaper, having dropped by ~6% from its highest level in 2022. Also, buying USD is a good way to “position yourself into a safe spot” in case mainland China decides to launch an attack on Taiwan. If this happens, the Taiwan dollar will likely drop because of the impact on Taiwan’s economy.

USD to TWD 6 month forecast next 6 months – analysis

The outlook of the USD to TWD pair has been in a downward trend after peaking in 2022. It has formed a death cross, which happens when the 200-day and 50-day moving averages make a crossover. This pattern is usually a sign that a financial asset will continue falling.

Therefore, the outlook of the pair will likely continue falling as sellers target the key support at 28.50. In the long term, however, the pair will resume the bullish trend as the Federal Reserve maintains its hawkish tone and invasion risks rise.

A bit more about USD to TWD