The Taiwan dollar recorded its strongest annual advance in five years in 2025, rising 4.27% against the US dollar amid sharp swings driven by global policy concerns and volatile capital flows.

The currency ended the final trading session of the year at NT$31.438 to the US dollar, little changed on the day. Over the course of the year, however, the greenback retreated by NT$1.343 from its end-2024 level, when it stood at a nine-year high of NT$32.781 Focus Taiwan reports.

After opening the year near NT$32, the Taiwan dollar came under pressure from uncertainty over prospective US tariffs. That was followed in May, Focus adds, by a burst of speculative enthusiasm over further appreciation, which briefly pushed the currency close to NT$29. The rapid move prompted the central bank to intervene to dampen inflows of short-term capital.

Despite record highs in Taiwan’s equity market, sustained selling for a period by foreign institutional investors led to significant capital outflows, dragging the currency back towards NT$31.5.

Overall, the Taiwan dollar traded within a wide band of roughly NT$29 to NT$33 in 2025, underlining heightened volatility. However, its annual performance compared favourably with regional peers, outperforming the South Korean won and Japanese yen - and closely tracking gains in China’s renminbi.

Looking into 2026, economists in Taiwan are expecting further appreciation to be uneven, shaped by shifts in US Federal Reserve policy and growing overseas investment by Taiwanese households.