The Taiwan dollar is surging against the US dollar, alarming exporters and creating headaches for Taiwanese life insurers, which have ploughed huge sums into US bonds. Other Asian currencies are also rising, notably the Malaysian ringgit.  

The movement in Asian currencies says less about regional developments than it does about regional appetite for USD, “as the world’s export powerhouse starts to question a decades-long trend of investing its big trade surpluses in US assets.” 

As Bloomberg’s Tian Chen put it, the currency volatility “shows how an exodus from the world’s reserve currency can ripple through financial markets”. 

Keeping track of USD has become more complex, too. Torsten Sløk, in his invaluable daily commentary, points out that since Trump’s tariff announcement, there is no longer a tight correlation between interest rate differentials and dollar performance. That suggests other factors, beyond rate difference, are driving US dollar movements.  

A shifting FX paradigm? 

Could these moves indicate a structural shift in global FX dynamics? 

FX traders have long relied on well-established correlations, notably the rate spread, to anticipate USD movements. In today’s landscape, geopolitics, trade realignment, and political risk may become central. 

This new paradigm could present traders with new risks and opportunities. But it may be too early to confidently predict what the new playbook will look like. 

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