Technical Terms

New Taiwan dollar is an important dollar denominated currency in Asian continent. It serves as the official currency of the Republic of China including islands like Taiwan, Penghu, Kinmen and Matsu. The New Taiwan dollar was introduced as the official currency of Taiwan in 1949 for the first time, though Republic of China adopted as its national currency recently in 2000. In local languages, Taiwan dollar is also called "yuan" and is denoted informally with the sign "元" and formally with the sign "圓" in Chinese numerals. The currency is also known as "kuài" in Taiwanese language. Normally, in daily transactions, the Taiwan dollar is abbreviated as "NT$".

"Jiao" and "cent" forms the subunits of the Taiwan dollar, the previous one is of the value 1/10th of one unit and the latter one is of the value 1/100th of one unit of the currency. According to the International Organization for Standardization regulation 4217, New Taiwan dollar is assigned with the currency code TWD and a numeric code 901.

Overview

New Taiwan dollar has recently been adopted as the national currency of Republic of China in the year 2000, though it has served as the national currency of Taiwan since 1949. The economy of Republic of China has flourished since the end of the Chinese civil war and the rapid industrialization the country has gone through is often considered as "Taiwan Miracle". The current situation of the country’s economic profile suggests that Taiwan possesses dynamic, capitalist economy, which is highly driven by exports. Taiwan is even counted among the "Four Asian Tigers" along with three other economies that show like potential including Singapore, South Korea and Hong Kong. Much of the development has been possible with the aid provided by Unites States of America. Also, it is said that when the government Republic of China fled to Taiwan, it brought along with itself, all the gold reserves and the best businesses from the Mainland China. This helped the country control hyperinflation.

Event the currency, New Taiwan dollar has performed really well in the recent years and is still growing strong as against the US dollar. As Taiwan is an export dependent country, the inflation in world oil prices holds a serious threat to the economy but the constantly strengthening currency has leveled the ill effects of oil price inflation till now. All the major currencies are accepted in Taiwan with an export import limit pertaining to local currency is NT$ 60000. This limit is not in case of export import of foreign currency but the transfer of amounts exceeding US$ 10000 need declaration.

The island of Taiwan was first spotted by the Portuguese and named "Ilha Formosa" meaning a beautiful island in 1590. Until this time, the major Chinese settlement of Taiwan had not begun. The Dutch, for the first time, colonized the island in 1624 and established a commercial base in there. Though the reign of the Dutch on Taiwan did not last long as in 1662, they were defeated and driven away by the Ming dynasty from southern Fujian. A few years later, at the fall of Ming dynasty, the Qing dynasty officially annexed Taiwan in 1683. All this while, Chinese coins mostly Chinese taels were imported and circulated in Taiwan and it continued to be circulated till the 1800s.  

During the mid 19th century, China issued silver dollar to pay for the military expenses and as Taiwan was a part of Chinese empire, the dollars along with Chinese taels started to circulate within the state. In 1895, China surrendered Taiwan to the Japanese and before the defeat of Japan in World War II, Taiwan was ruled over by Japan only. As soon as it got hold of the island, Japan issued Taiwan yen at par with Japanese yen as the currency to be used there. Japan had to return Taiwan back to China after its defeat in the 2nd world war and a separate currency unit for the island was issued in the name Taiwan Nationalist yuan (TWN) that was independent from the official currency of China, Chinese Nationalist yuan. The currency, also popularly known as Old Taiwan dollar, was issued by the Bank of Taiwan and was pegged to Japanese yen. During this time, the value of Chinese yuan was depreciating drastically and so was the value of old Taiwan dollar, but the latter one was depreciated at a much slower rate than the first one.

Also in the 1940s, Taiwan encountered severe inflation due to corruption of the Governor General of Taiwan and in the administration of Bank of Taiwan that printed banknotes in excess than legally permitted. In 1949, the nationalist forces took over Taiwan and the New Taiwan dollar was introduced @ 1 New Taiwan dollar = 40000 old Taiwan dollars. Later in the same year, the Republic of China government had to move to Taiwan. Even after this event, Republic of China continued with Chinese yuan as its national currency and New Taiwan dollars circulated within the country as a de facto currency. In the year 2000, the de facto currency was adopted for the national currency by the Republic of China and it gave up the use of the previous currency.

The volatility in the foreign exchange rates depends upon a numerous macro economic factors that have different degrees of importance to different economies of the world. Some special and exceptional factors affecting the rates may also exist in the case of different countries. Following are shown the common factors on which the foreign exchange rate depends

• Flow of imports and exports between the countries
• Flow of capital between the countries
• Relative inflation rates
• Fluctuation limits on exchange rate imposed by the governments of the countries
• Merchandise trade balance
• Rate of inflation in the country
• Flow of funds between the countries for the payment of stock and bond purchases
• Relative growth
• Short term and long term interest rate differentials
• Cost of borrowings