SINGAPORE — The dollar struggled to make headway on Tuesday as an unprecedented two-day surge in its Taiwanese counterpart spilled over to other regional peers and highlighted the fragility of the US currency.
Hong Kong’s de-facto central bank said earlier in the day it bought $7.8 billion (HK$60.5 billion) to stop the local currency from strengthening and breaking its peg to the US dollar.
Investors were also awaiting actual progress in trade negotiations with the United States and evidence of a thaw in Sino-US relations, as opposed to just hints from officials.
The Taiwan dollar on Monday surged to a three-year high of 29.59 per dollar, having leapt 8 percent in two days, in a move which coincided with the end of US-Taiwan trade talks in Washington. It was last steady at 30.02 per dollar.
“While the move has been driven by hedging activity from lifers, the factor many talk about is whether these countries with historically ‘weak’ and heavily managed currencies are now appealing to Trump through the currency channels and are now allowing for an appreciation of the currency as part of the trade negotiations,” said Chris Weston, head of research at Pepperstone.
Such a deal has been repeatedly denied by Taiwan’s central bank, but the market is not entirely convinced and sees the Taiwan dollar’s jump having its tacit approval, as well as likely to be welcomed by the United States.
Currencies like the Australian dollar and the yen also benefited from the fallout, with the Aussie last hovering near Monday’s five-month high at $0.6449.
