The U.S. dollar continued to weaken sharply this week, fueling a strong rally in Asian currencies including the Taiwan dollar, Chinese yuan, and Hong Kong dollar. The decline comes amid renewed fears of aggressive U.S. trade tariffs and rising speculation about monetary policy shifts, prompting urgent interventions by central banks across the Asia-Pacific region.
Tariff Tensions Push U.S. Dollar Lower, Fueling a Surge in Asian Currencies
The greenback’s downturn intensified after U.S. President Donald Trump reiterated his protectionist agenda during a weekend interview, announcing a new 100% tariff on foreign-made films and hinting at additional duties on semiconductors. These announcements reignited concerns over an escalation in U.S.-Asia trade tensions and triggered a reevaluation of global currency strategies by investors.
On Monday, the dollar fell 0.73% against the Japanese yen to 143.885, and declined 0.50% against the Swiss franc to 0.82255. The euro appreciated 0.15% to $1.1316, while the British pound rose 0.21% to $1.3295. In the Asia-Pacific, a series of sharp gains in local currencies reflected both economic resilience and shifting sentiment away from dollar-denominated assets.
The Taiwan dollar surged to a three-year high of 28.8150 per USD, fueled by strong capital inflows into the nation’s booming tech sector, particularly semiconductors. Market observers believe the central bank may be allowing the currency to appreciate as part of trade negotiations with the U.S. or simply choosing not to intervene amid momentum-driven appreciation. Taiwan’s central bank confirmed it had intervened “at the right time” to manage volatility, as traders became the most bullish on the TWD since the 2008 global financial crisis.
In Hong Kong, the HKD reached the top of its trading band (7.75–7.85 per USD), prompting the Hong Kong Monetary Authority to intervene with a record HKD 46.5 billion (approximately USD 6 billion) in a single day—its largest intervention since the peg to the U.S. dollar was introduced over four decades ago.
The offshore yuan also advanced, touching 7.1831 per dollar—its strongest level in nearly six months—before stabilizing at 7.2014. Market participants are betting that Chinese authorities may permit further yuan appreciation as part of a strategic shift in trade negotiations with Washington. The Australian dollar reached $0.64935, its highest level since December. Meanwhile, other Asian currencies such as the South Korean won, Malaysian ringgit, and Thai baht all climbed more than 1% in a single day, underscoring the region’s collective currency momentum.
Behind these moves lies a broader shift in global investor sentiment. According to Juan Perez, head of trading at Monex USA, “Markets are returning to a sour mood. There’s a sense that U.S. markets are no longer the reliable safe haven they once were.” This skepticism has translated into significant selling of U.S. assets and diversification into regional currencies and markets.
Expectations around U.S. monetary policy have also shifted. Although the Federal Reserve is expected to keep interest rates unchanged in its upcoming meeting, the likelihood of a rate cut in June has dropped to 37%, down from 64% a month ago. Analysts at Goldman Sachs and Barclays are now projecting a potential rate cut for July instead.
Meanwhile, Chinese exporters—long reliant on the U.S. dollar and Treasury bonds—are beginning to pivot. A Bloomberg survey shows that many Chinese firms are reducing their dollar holdings and instead accumulating more yuan, signaling a major shift in reserve management amid prolonged trade disputes.
“With rising pressure on the U.S. dollar and growing recession fears, holding assets in dollars has become less attractive,” said Kamakshya Trivedi and his team at Goldman Sachs. “We anticipate further appreciation in currencies like the yuan, Taiwan dollar, and ringgit in the near term.”
While stronger local currencies can make imports cheaper and attract foreign investment, they also pose challenges for export-driven economies. As goods become more expensive in dollar terms, regional exporters may face eroding competitiveness in global markets.
In the face of ongoing trade friction, monetary divergence, and investor hesitation toward U.S. assets, the global currency landscape is clearly shifting. For now, the rally in Asian currencies signals not just a reaction to current headlines, but potentially a longer-term realignment in global capital flows.
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