Taiwan currency’s surge a ‘warning shot’ for Asia’s de-dollarisation: analysts

The New Taiwan dollar’s recent surge, along with the appreciation of other Asian currencies, suggests a deepening of regional de-dollarisation as investors rethink their investments in the US currency amid Washington’s “extremely predatory” behaviour towards foreign countries, analysts said.

Economies like Taiwan, with a historically high exposure to assets denominated in US dollars, have taken a foreign exchange-led hit after the American currency weakened in recent weeks, wrote Francesco Pesole, foreign exchange strategist at Dutch bank ING, in a note on Tuesday.

“Local players are now seeking greater US dollar hedging, as well as starting to diversify away from US investments.”

The shift from US assets is likely to contribute to the continued devaluation of US dollars, supporting a “bearish narrative” for the currency, Pesole added.

The New Taiwan dollar’s surge hit a pause on Tuesday, closing at NT$30.280 to US$1 from Monday’s NT$30.145 – ending a strengthening streak observed since April 24. It traded at NT$30.244 as of Wednesday afternoon.

Taiwan’s central bank published a statement on Monday urging manufacturers to remain calm and avoid “dumping US dollars due to irrational expectations based on over-exaggerated or untrue analyses in the market”.