US May Be Pressuring Exchange Rates... Asian Currencies Strengthen Together

Growing Volatility in the Foreign Exchange Market

Taiwan Dollar Jumps 9% in Two Days

Offshore Won-Dollar Once at 1350 Won

As speculation spreads that the Trump administration is pressuring the Taiwanese government to appreciate its currency, the value of the Taiwan dollar surged by more than 9% over two days. Concerns that the US government might push for a weaker dollar during tariff negotiations added to the rise in the value of Asian currencies, including the Korean won.

According to foreign exchange authorities on the 6th, the Taiwan dollar fell to 29.183 against the US dollar at one point in the foreign exchange market on the 5th (local time). This is a 4.95% increase in currency value compared to the previous trading day. On the previous trading day, the 2nd, the Taiwan dollar appreciated by 4.39%. The appreciation of the Taiwan dollar over the past two trading days (9.34%) is the largest in 30 years.

The sharp rise in the value of the Taiwan dollar is interpreted as a result of the growing expectation that the Taiwanese government will tolerate a strong Taiwan dollar as part of trade negotiations with the US. Consequently, the values of Asian currencies such as the Korean won (5.45%), Chinese yuan (8.33%), and Japanese yen (1.63%) also strengthened together over two days. The appreciation of the won was amplified as Taiwanese life insurers sold dollar forwards in the offshore won non-deliverable forward (NDF) market to hedge against the future weakening of the dollar. According to Bloomberg, the one-month won-dollar NDF in New York fell to 1357 won 81 jeon at one point on the 5th. This is about 40 won lower than the closing price (1401 won 50 jeon) in the overnight foreign exchange market on the 2nd.

Yang Chin-long, Governor of the Central Bank of Taiwan, officially denied on the 5th the prospect of exchange rate negotiations with the US, stating, "Exchange rates were not included in the trade negotiation agenda with the US." Changyong Rhee, Governor of the Bank of Korea, said at a local press conference in Milan that day regarding the strengthening of Asian currencies, "One reason is that it is known that the US is putting pressure on individual countries to appreciate their currencies, and the second is that the probability of a US-China negotiation settlement has increased," predicting, "If things suddenly change, the exchange rate will rise again."

New York = Shin-Young Park, Correspondent / Young-Hyo Jeong, Reporter nyusos@hankyung.com