Euro-Taiwan Dollar Investment Outlook: 20-Year Trend Review and Future 5-Year Opportunity Assessment

First, Clarify: Why Is the Euro Worth Paying Attention To?

As the world’s second-largest reserve currency, the euro has been in circulation since 2002 for over 20 years. During this period, the euro has experienced major events such as the 2008 financial crisis, the eurozone debt crisis, and pandemic shocks, with astonishing exchange rate fluctuations. For Taiwanese investors, understanding the long-term trend of EUR/TWD helps in planning foreign exchange strategies.

Major Events in 20 Years of Euro Exchange Rate

July 2008 historical high: 1.6038

The euro hit a record high against the US dollar at 1.6038 in July 2008, then entered a 9-year downward cycle. Behind this peak was the global financial shock triggered by the US subprime mortgage crisis.

What happened at that time?

The impact of the financial tsunami on Europe came from multiple dimensions: European large banks were deeply tied to US financial institutions; subprime bond defaults directly affected European banks’ balance sheets; credit tightening led to financing difficulties for companies, slowing economic growth; governments were forced to undertake large-scale fiscal spending to combat recession, rapidly increasing public debt.

The European Central Bank (ECB) immediately launched quantitative easing and negative interest rate policies to stabilize financial markets. Although these policies provided liquidity support, they also exerted long-term downward pressure on the euro. Soon after the crisis, debt crises in Greece, Ireland, Portugal, and others surfaced, further undermining confidence in the euro system.

January 2017 historical low: 1.034

After nearly 9 years of continuous depreciation, the euro against the dollar fell to 1.034 in January 2017, hitting a 20-year low. Subsequently, market sentiment reversed, and the euro began to rebound.

Factors behind the turnaround:

Eurozone economic data showed clear signs of improvement—unemployment successfully fell below 10% at the end of 2016, and manufacturing PMI broke through 55, indicating accelerated manufacturing activity. These indicators suggested that the ECB’s long-term easing policies were gradually taking effect.

Geopolitical uncertainties also eased. In 2017, the UK and EU launched Brexit negotiations; initial talks were relatively rational, easing concerns about EU cohesion. Meanwhile, the US new administration’s policy direction was unclear, leading some safe-haven funds to flow into euro assets.

Objectively, the euro had fallen over 35% from its 2008 high, becoming severely oversold and laying a foundation for a rebound.

February 2018 rebound high: 1.2556

The euro rose to 1.2556 in February 2018, reaching a high not seen since May 2015, but then began to correct.

Why did the rebound falter?

In the first half of 2018, the US Federal Reserve continued to raise interest rates, strengthening the US dollar index and exerting downward pressure on the euro. Eurozone economic growth peaked at 3.1% in Q4 2017 and then declined; manufacturing PMI also retreated from high levels.

Italian political risks emerged—Five Star Movement and Northern League formed a coalition government, with disagreements on economic policies, prompting reevaluation of political stability in Europe.

September 2022 20-year low: 0.9536

After the outbreak of the Russia-Ukraine war, risk aversion increased, and the dollar was sought as a safe asset. Europe faced an energy crisis, with natural gas prices soaring to historic highs, pushing inflation up and threatening economic growth. The EUR/USD exchange rate fell to 0.9536 in September 2022, hitting a 20-year low.

How did it rebound afterward?

The ECB raised interest rates consecutively in July and September 2022, ending 8 years of negative rates, signaling a shift toward tightening monetary policy. As the Russia-Ukraine situation stabilized into a stalemate, market risk aversion gradually eased. International energy supply chains adjusted, and natural gas and oil prices retreated from highs, easing corporate cost pressures.

Investment Logic for EUR/TWD in the Next 5 Years

Economic Growth: Concerns to be Addressed

While the eurozone’s declining unemployment rate is a bright spot, economic growth is near zero, with aging industries and normalized geopolitical risks—these issues are difficult to resolve in the short term. Recently, manufacturing PMI fell below 45, indicating a weak economic outlook for the next half year.

Central Bank Policies: Relative Advantages

The US Federal Reserve signaled a dovish stance at the end of 2023, with a rate cut cycle imminent. The ECB remains cautious, with no clear guidance on when to significantly cut rates. This suggests that short-term euro interest rates may remain higher than US rates, providing support for the euro.

Historically, after the start of a US rate cut cycle, the US dollar index usually declines significantly within 3-5 years, which is favorable for the euro.

Global Economic Outlook: Dual Risks

If the global economy maintains growth, demand for European products will increase, benefiting the euro. But if a recession exceeds expectations, capital will flow back to the US, strengthening the dollar and depressing the euro.

Four Ways for Taiwanese Investors to Trade EUR

Method 1: Bank Foreign Exchange Accounts

Advantages: high security; disadvantages: limited liquidity, no short selling, wider spreads.

Method 2: International Forex Brokers (CFD Platforms)

Preferred by small investors and short-term traders, supporting two-way trading and leverage, with low entry barriers but risks to watch.

Method 3: Securities Firm Forex Services

Some securities firms offer EUR spot trading, combining bank-level security with better liquidity.

Method 4: Futures Exchanges

Trading euro futures through futures markets, suitable for experienced investors.

Investment Decision Framework

Optimistic Scenario: If the US begins rate cuts in the first half of 2024 and no major financial crises occur, the euro is likely to regain upward momentum. The euro could continue rising before the ECB significantly cuts rates.

Pessimistic Scenario: If major geopolitical crises occur (e.g., worsening Taiwan Strait tensions, Middle East escalation), safe-haven funds will quickly flow back to the US, leading to US dollar appreciation and euro depreciation.

Recommended Approach: Closely monitor US economic data and Federal Reserve policy signals, as well as European inflation, employment, and manufacturing indicators. Adjust positions promptly based on changing conditions.

Whether or not investing in euros, understanding the 20-year trend of EUR/TWD helps in grasping global currency market dynamics.