US President Donald Trump’s efforts to “rebalance” global trade have spooked Wall Street, disquieted US Treasuries and sent investors rushing to buy gold. They have now also roiled a normally staid corner of financial markets, with major potential implications for the future of the US dollar and the global economy.
Since Friday, Taiwan’s currency has gained about 8% against the greenback, according to Refinitv data, an extraordinary amount over just two trading sessions because of speculation that the island has had to make trade-related concessions to the White House.
And even though things are now calmer, Monday’s surge was the largest daily percentage gain in about four decades, according to Reuters, which was all the more surprising because the island’s central bank likes to keep things stable and quiet.
The gyrations in Taiwan — and also in nearby Hong Kong, a city with a currency market that similarly tends to avoid the limelight — demonstrate how Trump’s trade war has already had far-reaching consequences.
Yang Chin-long, governor of Taiwan’s central bank, was forced to convene a hastily arranged press conference late on Monday to shoot down rumors that the Trump administration had asked the island to strengthen its currency against the US dollar in exchange for tariff exemptions during ongoing trade talks.
“Stock market commentators are urged not to comment … in a speculative manner to avoid affecting the order and stability of Taiwan’s foreign exchange market and even affecting the real economy,” he said in a statement.
On Sunday, Trump told reporters on board Air Force One that his administration was meeting with “almost” every country, and some trade deals “could very well be” announced this week.
Taiwan’s president, Lai Ching-te, also weighed in, calling reports about a deal with the US on exchange rate policy “false news” on Monday. A stronger currency would make Taiwanese products more expensive compared to the US dollar, which would make Taiwan’s exports less competitive.
The island is one of the most important nodes in the global technology supply chain because it is home to Taiwan Semiconductor Manufacturing Company, which produces more than 90% of the world’s advanced microchips powering everything from smartphones and artificial intelligence to weapons.
It’s been a “stunning” couple of days for the Taiwan dollar, said Sean Callow, a senior foreign exchange analyst at ITC Markets, who believes the US dollar’s “increasingly tarnished global reputation should leave (it) trending lower against most currencies.”
That would make US products cheaper and more competitive overseas, which would tally with Trump’s larger strategy to restore US manufacturing dominance. In that case, Asian economies would have to accept that their currencies would inevitably appreciate against the greenback and their exports would be affected, too.
In Hong Kong, its de-facto central bank said in a statement on Tuesday that it had spent $60.5 billion Hong Kong dollars ($7.8 billion) to buy US currency, a record daily amount according to Bloomberg, after the Hong Kong dollar once again hit the strong end of its trading band.
The former British colony still pegs the value of its currency to that of the US dollar. It’s an arrangement that dates back almost four decades and has long been considered a guarantee of financial stability and prosperity.
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