Outlook
The TWD is likely to stay in a narrow, modestly firm-to-flat range against the USD in the near term. Regulatory clarity from the mandatory clearing of TWD interest rate swaps and a cautious central-bank stance support stable liquidity, while AI-driven capital flows and broader risk sentiment keep volatility contained but present. If global risk appetite improves and policy remains non‑interventional, the bias could tilt modestly stronger; if risk conditions worsen or intervention expectations rise, a pullback could occur.
Key drivers
- Mandatory clearing of TWD interest rate swaps (IRS) implemented July 2025 improves market transparency and could support more predictable hedging costs and liquidity for participants.
- Exchange-rate volatility remains a factor as AI investment grows; December 2025 observations from the Chung-Hua Institution for Economic Research emphasised ongoing volatility and the need for effective hedging strategies.
- TWD posted its strongest annual gain against the USD in five years in 2025 (about +4.27%), driven by global policy concerns and capital flows; the move underlines a structural bias toward a firmer TWD, though not a guarantee.
- Central bank non‑intervention suggests a potential policy shift and ongoing discussions about regional de-dollarization, which could influence the pace and profile of any future moves in FX intervention.
Range
TWD/USD sits near 30-day highs around 0.032128, roughly 0.5% above its 3-month average of 0.031956, within a 3.6% range from 0.031569 to 0.032712. TWD/EUR is at 0.026744, about 2.4% below its 3-month average of 0.027395, within a 5.9% range from 0.026622 to 0.028181. TWD/GBP at 0.023246 is about 3.0% below its 3-month average of 0.023956, within a 7.3% range from 0.023147 to 0.024832. TWD/JPY at 4.9004 is about 1.6% below its 3-month average of 4.982, within a 3.6% range from 4.8782 to 5.0545.
What could change it
- A surprise shift in Taiwan’s monetary policy or a clearer signal of FX intervention could alter the pace or direction of the TWD’s move.
- Developments in the IRS clearing regime (costs, adoption pace) could affect hedging demand and liquidity dynamics.
- A sustained shift in global risk appetite, US policy path, or regional geopolitical tensions could drive broader FX volatility and relocate the TWD’s level.
- Ongoing de-dollarization trends or stronger cross-border capital flows could promote a firmer or more flexible currency path beyond current expectations.
