Emerging market currencies in Asia are gaining renewed attention in the global foreign exchange market. Following U.S. President Donald Trump's tariff measures, the strong dollar has weakened, allowing undervalued currencies such as the won, New Taiwan dollar, and Indonesian rupiah to show a rebound.
On the 11th (local time), Bloomberg reported that the value of major Asian currencies has fallen to its lowest level compared to historical averages. This is combined with a weak dollar, expectations for Chinese economic stimulus, and the possibility of progress in trade negotiations between the U.S. and Asia, which is leading to a resurgence in the attractiveness of Asian currencies.
According to Bloomberg, the surge in the New Taiwan dollar detected earlier this month is influencing the currencies of neighboring countries, resulting in a general uptick in Asian currencies. This is closely related to the rapid decline in the value of the dollar following the tariff policies announced by President Trump in April.
In particular, major investment banks on Wall Street are focusing on the rebound potential of the won. Goldman Sachs has identified the won as the most promising currency for conversion from dollar assets, while the Indonesian rupiah, Indian rupee, Malaysian ringgit, and South African rand are also cited as candidates for a rebound. U.K. investment bank Barclays has noted the potential for appreciation of the Singapore dollar and New Taiwan dollar in addition to the won.
As expectations for trade negotiations rise, investor sentiment towards Asian currencies is gradually improving. The Bloomberg Asian Currency Index has risen about 3% compared to its low in April, and global funds are purchasing local currency bonds in Indonesia, Thailand, and Korea. As pressure on the dollar weakens, the Hong Kong Monetary Authority has intervened in the foreign exchange market to defend the peg system (which fixes the exchange rate between the U.S. dollar and the Hong Kong dollar within a certain range).
However, it remains uncertain whether this upward trend will continue. Some analysts suggest that the relative stability of the Chinese yuan may reduce the volatility of Asian currencies while also limiting drastic appreciation. Kun Go, head of Asian research at Australia and New Zealand Banking Group, noted, "China still believes that time is needed for trade negotiations and does not want a strong yuan," adding that policies aimed at stabilizing the yuan's exchange rate could also limit the upward momentum of other Asian currencies.
The monetary policy direction of the U.S. Federal Reserve (Fed) is also a key variable. Recently, Fed Chair Jerome Powell expressed caution regarding interest rate cuts, leading to a rebound in the dollar and some Asian currencies to retract their gains. In the current economic situation, there are indications that Asian currencies might find it difficult to achieve noticeable excess revenue.
Nonetheless, major investment banks are still weighing the potential for additional appreciation of Asian currencies. Dominic Schneider, the chief investment officer (CIO) of UBS Asset Management, stated, "There is a need to prepare for unexpected surges like the New Taiwan dollar," adding, "We must focus on Asian currencies that still have significant revenue realization potential."