Dollar hemorrhage triggers currency market fluctuations, Asian currencies collectively soar.

Noted, Asian currencies rose sharply on Monday, damaging the interests of exporters, putting pressure on stock markets, and forcing central banks of various countries to intervene in the market to curb their excessive gains. The New Taiwan Dollar saw its largest increase since 1988, leading to the benchmark stock index in Chinese Taiwan Province experiencing its largest drop in nearly a month. The offshore renminbi climbed to its highest level in nearly six months as exporters converted their US dollar income back to domestic currency. The Hong Kong dollar maintained its strength within its trading band for the second consecutive trading day. At the same time, the Indonesian rupiah recovered most of its losses for the year, as less than a month ago, it had dropped to a record low. These fluctuations indicate that concerns about the US economic recession sparked by President Trump's continuously changing tariff policies may lead to a withdrawal of funds from global reserve currencies affecting financial markets. Last week, speculative traders' bearish bets on the US dollar reached their highest level since September last year, indicating that investors are increasingly reluctant to hold US assets. In the wave of "selling the US," Asian currencies such as the Japanese yen and the renminbi are benefiting from repatriation and alternative investments. Even though both Beijing and Washington seem to have softened their stance on the trade war issue, this strategy appears to remain unchanged. President Trump hinted over the weekend that he is willing to reduce import tariffs on Chinese goods to promote trade. Brad Bechtel, global head of FX trading at Jefferies, said, "The natural way to resolve trade tensions is to burst the US dollar bubble." Therefore, "shorting the US dollar against Asian currencies may make sense." The Asian forex markets have seen dramatic volatility in the past two days, with the Bloomberg index measuring Asian currencies recording their largest increase since 2022 last Friday, and an index measuring the return of emerging market currencies hitting a historic high. Early trading on Monday continued this trend, with the Asian Dollar Index at a six-month high. The strength of emerging market currencies helps attract foreign inflows and lowers import costs, but it reduces the competitiveness of export goods globally, thereby damaging the interests of exporters. The Taiwan dollar soared by about 5% on Monday, leading regional currencies to rise for the second consecutive day. This surge is due to speculation that exporters and retailers are actively selling the US dollar during a bet that the US dollar will fall further. Currency exchange requests surged, prompting Cathay United Bank to implement controls on its trading platform. Last Friday's surge prompted Taiwanese currency authorities to state that they had intervened in the market and requested foreign investors and large exporters to postpone selling US dollars. BNP Paribas said that Taiwanese authorities typically moderate severe currency fluctuations, but on Monday, they seemed not to intervene, sparking speculation in the market about a possible trade agreement involving the Taiwan dollar. Ju Wang, head of FX and rates in Greater China at BNP Paribas, said, "Currencies with the largest external surpluses are more vulnerable to worries about 'Plaza Accord 2.0', and the Taiwan dollar is the first to bear the brunt." "Local exporters are in a panic, local life insurers have insufficient hedging, and the outflow of stock-related funds has stopped." Similar to their Taiwanese counterparts, Chinese exporters no longer see the US dollar or US Treasuries as safe havens in trade conflicts. A Bloomberg survey showed that they have been changing their strategy of hoarding US dollars, favoring the renminbi instead. In other parts of Asia, the Malaysian ringgit rose more than 1%, and the Singapore dollar also strengthened. Mainland Chinese markets are closed for a holiday and will reopen on Tuesday. Traders are watching for further currency interventions, especially after the Hong Kong dollar tested the strong end of the trading band at 7.75-7.85 Hong Kong dollars against the US dollar for the second consecutive day. Last Friday, the Hong Kong Monetary Authority bought $46.5 billion HKD (about $6 billion USD), the highest record for such operations, in order to lower the exchange rate of the Hong Kong dollar. The appreciation of Asian currencies is also driven by investors withdrawing funds from the US dollar. Last month, as concerns about Trump's tariffs potentially raising inflation, damaging the economy, and preventing the Fed from cutting rates, the US dollar fell along with long-term US Treasury bonds and the US stock market. Kamakshya Trivedi and other analysts at Goldman Sachs wrote in a report, "Given the pressure facing the US dollar, and with the rising risk of a US recession and potential rate cuts, the risks and rewards of holding US dollar deposits appear significantly different for Asian exporters." Currencies such as the renminbi, the Taiwan dollar, and the ringgit may rise.