According to Xe.com, one US dollar was worth 30.69 Taiwan dollars as of May 10, 2023, at 10:52 UTC. This was slightly lower than the previous day, when one US dollar was worth 30.71 Taiwan dollars. The TWD/USD exchange rate has fluctuated between 30.41 and 30.78 in the past 30 days, and between 30.06 and 30.84 in the past 90 days.
The TWD/USD exchange rate is influenced by several factors, such as:
– The trade balance between Taiwan and the US. Taiwan is a major exporter of electronics, machinery, and chemicals to the US, while the US exports agricultural products, chemicals, and machinery to Taiwan. A trade surplus for Taiwan means more demand for TWD and less for USD, which tends to appreciate the TWD against the USD. A trade deficit for Taiwan means the opposite.
– The interest rate differential between Taiwan and the US. Taiwan’s central bank, the Central Bank of the Republic of China (Taiwan), sets the policy interest rate, which affects the borrowing and lending costs in the economy. The US Federal Reserve sets the federal funds rate, which is the interest rate at which banks lend to each other overnight. A higher interest rate in Taiwan than in the US attracts more foreign capital inflows into Taiwan, which increases the demand for TWD and lowers the demand for USD, which tends to appreciate the TWD against the USD. A lower interest rate in Taiwan than in the US has the opposite effect.
– The political situation in Taiwan and China. Taiwan is claimed by China as part of its territory, but has its own government and military. The US does not officially recognize Taiwan as a sovereign state, but maintains unofficial relations with it and provides it with military and economic support. The tension between Taiwan and China can affect the confidence of investors and traders in both countries, which can affect their demand for TWD and USD. A rise in tension can lead to more uncertainty and risk aversion, which can depreciate the TWD against the USD as investors seek safe-haven assets like USD. A decline in tension can lead to more optimism and risk appetite, which can appreciate the TWD against the USD as investors seek higher returns in emerging markets like Taiwan.
TWD/USD Exchange Rate Forecast
The TWD/USD exchange rate is expected to remain stable in the near future, as both countries have similar economic growth prospects and inflation expectations. According to Bloomberg, analysts forecast that Taiwan’s gross domestic product (GDP) will grow by 4.5% in 2023, while the US GDP will grow by 4.4%. The inflation rate in Taiwan is projected to be 1.6% in 2023, while the inflation rate in the US is projected to be 2.4%. These figures suggest that both countries have healthy and balanced economies that do not require significant monetary policy adjustments.
However, there are some risks that could affect the TWD/USD exchange rate in the medium to long term, such as:
– The COVID-19 pandemic and its impact on global trade and travel. The pandemic has disrupted supply chains and reduced consumer demand across many sectors, especially tourism and hospitality. Taiwan has been relatively successful in containing the virus outbreak and maintaining economic activity, while the US has faced more challenges and disruptions due to its large population and federal system. The pace and effectiveness of vaccination programs in both countries will determine how quickly they can recover from the pandemic and resume normal trade and travel.
– The geopolitical tensions between Taiwan and China and their implications for US-Taiwan relations. The relations between Taiwan and China have deteriorated in recent years due to China’s increased military activities near Taiwan’s airspace and waters, as well as its diplomatic pressure on other countries to isolate Taiwan internationally. The US has reaffirmed its commitment to support Taiwan’s security and autonomy under the Taiwan Relations Act of 1979, but has also urged both sides to avoid provocation and escalation.
