Global Markets Steady as Dollar Firms and Asian Currencies Surge Amid Trade Uncertainty

Global markets remained largely flat on Tuesday as investors treaded carefully ahead of Wednesday’s U.S. Federal Reserve policy decision and ongoing trade policy uncertainty from Washington. The U.S. dollar recovered slightly after recent losses, while stocks showed minimal movement globally. Investors continued to assess the economic implications of escalating tariff measures and erratic trade signals, particularly as concerns around slowing growth and geopolitical tensions mounted.

Much of the market’s attention shifted to Asia, where currencies like the Taiwan dollar have surged in recent sessions, prompting speculation about broader regional FX revaluations. The Taiwan dollar’s strong rally suggested a significant unwinding of long-held dollar positions, particularly among exporters and institutional investors. Analysts believe these shifts could have deeper implications for Asian economies heavily reliant on trade surpluses and U.S. dollar exposure.

In response to rapid currency movements, Hong Kong’s monetary authority intervened by purchasing $7.8 billion to prevent the Hong Kong dollar from strengthening beyond its U.S. dollar peg. China’s yuan also gained, reaching its highest level since late March, while Taiwan’s currency held near a three-year high. These developments have raised fears of a potential “reverse Asian currency crisis” that could reverberate through bond markets and shift institutional investment behavior.

Stock indices across Asia responded modestly. While Japanese markets were closed for a holiday, the MSCI Asia-Pacific ex-Japan index rose slightly. Chinese stocks bounced back following an extended holiday, with the CSI 300 climbing nearly 1%, and Hong Kong’s Hang Seng Index up 0.69%. In contrast, U.S. markets closed lower on Monday, with the S&P 500 ending its longest winning streak in two decades, reflecting broader investor anxiety.

In Europe and the U.S., futures pointed to a lackluster start to the trading day, with eyes on upcoming manufacturing data for insights into the economic toll of tariffs. Trade negotiations between the U.S. and China remain in flux, despite recent overtures from both sides. President Trump’s imposition of a 100% tariff on foreign-produced movies added to the confusion, offering little clarity on implementation and further clouding market sentiment. Investors remain watchful for any substantive developments from Washington or Beijing.

Source: Reuters