The U.S. dollar weakened on Monday following a dramatic surge in the Taiwan dollar, which jumped over 7% in just two trading sessions. This unexpected rally sparked speculation that Asian central banks, possibly under quiet pressure from the United States, were allowing their currencies to appreciate in exchange for trade concessions. Despite denials from Taiwan’s central bank, market observers are interpreting the move as part of a broader currency strategy in ongoing trade dynamics.
The Chinese yuan also gained ground, reaching a six-month high amid rumors that Beijing could permit further currency strength as part of U.S.-China trade negotiations. While the Chinese Commerce Ministry acknowledged it was reviewing a U.S. offer for new talks, the gap between both sides remains wide. Meanwhile, President Trump reiterated interest in a deal but criticized Federal Reserve Chair Jerome Powell and repeated his call for lower rates, even as the Fed is expected to hold steady at its upcoming meeting.
Despite solid U.S. payroll data in March, the dollar failed to gain traction, as reduced expectations for a June Fed rate cut weighed on sentiment. Goldman Sachs and Barclays both shifted their expected cut timelines to July, but thin trading volumes in Asia due to regional holidays added to the dollar’s struggle to maintain momentum. In contrast, the euro and yen strengthened, while falling oil prices benefitted Japan’s trade balance.
Investor confidence in the dollar remains fragile due to erratic U.S. policies and perceived pressure on Fed independence. As speculative short positions rise, analysts like NAB’s Sally Auld foresee a potential multi-year decline for the greenback. With key data such as the ISM services index and upcoming central bank meetings in the UK, Norway, and Sweden, currency markets face a pivotal week. Meanwhile, the Australian dollar held steady following the re-election of Prime Minister Anthony Albanese, reflecting renewed investor confidence in the region.
Source: Reuters