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The Taiwan currency recorded its biggest bond of two days in decades, while life insurers have decided to cover their American portfolios exposed and the worried markets that a trade agreement with Donald Trump could include the exchange rate.
Expanding its earnings when opening the negotiation on Monday, the new Taiwan dollar increased by 2.5% against the greenback, passing its two -day gain to 6.5%. Its total increase since the beginning of April is almost 10%.
The movement of sudden currency in Taiwan Shows how the impact of the American trade war is collapsing in the world economy. This could harm the competitiveness of the economy oriented towards the export of the island and expose Taiwanese insurers to losses through their assets of American active.
“Local exporters are panicking and local conferences are under-light, while the actions have stopped,” said Ju Wang, BNP Paribas strategist in Hong Kong.
“The central bank remains the only buyer but has not aggressively supporting the market, fueling speculation that the evaluation of currencies is part of the commercial talks,” she said.
Taiwan has a huge bunch of assets abroad amounting to 1.7 tn $A large part of it in the form of American bonds – including treasury bills and business debt – held by its life insurers.
However, many of these insurers have not covered their exposure to currencies, so they are exposed to losses when the US dollar falls. A rush to cover these risks in a market drop could have exacerbated the decision of the currency, analysts said.
The currency jumping was exacerbated by speculation that a possible trade agreement with the United States could include provisions to strengthen the Taiwanese currency and make it less competitive.
In a statement published on Friday, the Central Bank of Taiwan denied the allegations according to which the US Treasury Department had requested an assessment in its currency within the framework of a trade agreement.
The BNP Wang was skeptical. “Although no economy officially recognizes that the evaluation of currencies is a negotiation point, market expectations indicate the opposite. This is particularly notable given the accent put by the Mar-A-Lago (agreement) on an overvalued US dollar being a deep cause of commercial imbalances in the United States. ”
Pushed by its competitive semiconductor sector worldwide, Taiwan is the seventh American American trading partner. In 2024, he experienced a trade surplus of $ 74 billion with the United States.
TSMC's shares, the world's largest producer of contract semiconductor, dropped by 1.3% on Monday. A lower US dollar would harm Taiwan semiconductor manufacturing co in terms of local currency.
