Look at the history first to see through the present
To understand why the Taiwan dollar has recently surged so dramatically, we need to look at the trajectory over the past decade. Reviewing data from October 2014 to October 2024, the historical exchange rate of the Taiwan dollar has fluctuated between 27 and 34 yuan, with an amplitude of about 23%. This level of fluctuation is relatively stable among global currencies—compared to the 50% volatility of the Japanese yen (oscillating between 99 and 161 yuan), the Taiwan dollar has indeed performed quite steadily.
Why has the Taiwan dollar behaved this way? The core reason is not Taiwan’s central bank but the Federal Reserve. The Taiwan dollar’s rise and fall mainly depend on the Fed’s interest rate policies, not Taiwan’s own policies. During the COVID-19 pandemic in 2020, the Fed expanded its balance sheet from 4.5 trillion USD to 9 trillion USD, with interest rates dropping to zero, leading to a significant depreciation of the US dollar. As a result, the Taiwan dollar appreciated steadily to 1 to 27 yuan. However, after 2022, with US inflation spiraling out of control, the Fed began aggressively raising interest rates, causing the US dollar to soar, and the Taiwan dollar exchange rate