What is the New Taiwan Dollar (TWD)?
The new Taiwan dollar (TWD) has been the currency in Taiwan since 1949. It replaced the old Taiwan dollar at a rate of 40,000 old Taiwan dollars for one new dollar. In 2000, the Central Bank of the Republic of China (Taiwan) became the official issuer of the New Taiwan dollar. This is often confused with the People's Republic of China, commonly called China. The Republic of China (Taiwan) controls their dollar, not China (People's Republic).
The TWD is divided into 10 dimes and 100 cents. Prices are typically in whole dollars, so dimes and cents typically don't matter to consumers, but do to banks and business.
Since the TWD has been in circulation since 1949, it is usually just called the Taiwan dollar. The "new" is not required and is meant only to differentiate from the old currency, which is not in circulation.
- The new Taiwan dollar (TWD) replaced the old Taiwan dollar in 1949 at a rate of 40,000 old per new dollars.
- The TWD is typically used in full dollar amounts, although it is officially divisible by 10 (jiao) and 100 (fen).
- NT$ is the internally recognized symbol for the Taiwan dollar, and TWD is its currency code.
Understanding the New Taiwan Dollar (TWD)
The new Taiwan dollar's ISO 4217 currency code and the abbreviation is TWD. TWD is the legal currency for the Republic of China within Taiwan, Penghu, Kinmen, and Matsu.
It is made up of 10 kak and further subdivided into 100 sian in Taiwanese (jiao and fen in Mandarin, respectively). NT$ is the internationally recognized symbol for the New Taiwan dollar.
History of the New Taiwan Dollar
The Qing dynasty of China effectively colonized and gained control of Taiwan between the late 1600s and the end of the 19th century, during which time the Japanese repeatedly attempted to seize control of the island. When China ceded the island to Japan to end the first Sino-Japanese War in 1896, the Taiwan yen became the official currency of Taiwan.
With the end of World War II and the defeat of the Japanese Empire in 1945, China regained control of Taiwan. The Republic of China (ROC) directed the Bank of Taiwan to begin issuing old Taiwan dollars as the official currency to replace the Japanese-backed yen at a ratio of 1 to 1.
The Impact of History on the New Taiwan Dollar
The Chinese Civil War between Nationalist and Communist forces, which had paused during World War II, soon rekindled and resulted in the Nationalists being driven from the mainland. The ROC, under the leadership of Chiang Kai-shek, had moved all of China’s gold reserves to Taiwan before fleeing the mainland and establishing the government in Taipei.
During the struggle, the Chinese yuan and the Taiwan dollar both experienced a period of hyperinflation. In order to establish credibility for the ROC government and encourage economic development, the Bank of Taiwan began issuing new Taiwan dollars in 1949 to replace the old Taiwan dollar at a ratio of NT$1 to 40,000 old dollars.
Despite being declared the official currency of Taiwan, the new Taiwan dollar was seldom used, and Taiwan had no currency of its own for several decades. A series of temporary emergency provisions in response to the Communist takeover of the mainland made the silver yuan the legal currency of Taiwan for many years. In 2000, the Central Bank of the Republic of China in Taiwan replaced the Bank of Taiwan as the issuer of the TWD, and it became the official currency of Taiwan. Bank notes that were issued by the Bank of Taiwan were gradually removed from circulation.
New Taiwan Dollar (TWD) Denominations
TWD is available in denominations of NT$1, NT$5, NT$10 and NT$50 in coin form. Denominations of NT$½ and NT$20 were minted but are rarely used.
As for paper currency, the dollar is available in NT$100, NT$500, and NT$1,000 denominations, with NT$200 and NT$2,000 denominations printed but rarely used. The dollar is technically divisible into subunits of 100 fen or 10 jiao, but nearly all transactions are in whole dollar amounts.
Historical Value of the New Taiwan Dollar (TWD)
Going back to the 1950s, the TWD has fluctuated significantly against the U.S. dollar (USD). Its rate was less than NT$10 per USD in the 50s, was over 40:1 in the 60s, and as of June 2019 is NT$31.37 per USD.
Example of Exchanging USD for New Taiwan Dollar (TWD)
Assume a traveler is headed to Taiwan and wants to do some exchange rate research before they get there. They look at a USD/TWD quote online and see that the current rate is 31.37, which means it costs NT$31.37 to buy $1.
If our traveler wants to exchange physical currency, the banks and currency exchange merchants are unlikely to provide that rate as they want to make some money on the exchange as well.
Therefore, assume our traveler wants to exchange $1,000 into TWD. Instead of getting a rate of 31.37, they will likely 3% to 5% less, or maybe even up to 7% less. Assuming a rate of 5% less, a merchant may exchange at a rate of 29.8. Therefore, instead of getting NT$31,370 (31.37 x 1000) , they get NT$29,801 (29.8 x 1000).
The same thing will happen if they want to convert back to USD. The currency exchanges and banks will take a cut on this transaction as well. Assume the traveler didn't spend all their cash and wants to covert NT$6,000 back to USD. The exchange rate online still shows 31.37 USD/TWD. Instead of getting $1 for NT$31.37, the exchangers may charge 32.94. This means they get $182.15 instead of $191.27 (31.37 rate).