The dollar experienced difficulties in the secondary market, as the unprecedented two-dimensional surge of its Taiwanese colleague is shifting to other regional currencies and undermining the strength of the American currency. The Hong Kong Monetary Authority previously reported having purchased $7.8 billion (60.5 billion Hong Kong dollars) to prevent strengthening the local currency and break its peg to the USD.
Investors were also awaiting real progress in trade negotiations with the United States and confirmations of a slowdown in Sino-American relations, rather than just hints from officials. The Taiwanese dollar on Monday surged to a three-month maximum, reaching a high of 29.59 against the dollar and advancing by 8% over two days, coinciding with the conclusion of trade negotiations between the U.S. and Taiwan in Washington.
The dollar index last month showed a monthly decline of 4.3%, the largest drop in the past two years. The Federal Reserve announced its decision on monetary policy in mid-December and is likely to keep interest rates at their unchanged level, but this meeting could be the last when the results may become apparent.
Elsewhere, the euro fell by 0.25%, to 1.1287 dollars, and the pound dropped by 0.24%, to 1.3265 dollars. The New Zealand dollar declined by 0.3%, to 0.5949 dollars. The Bank of England is also conducting a meeting this week and is expected to lower the interest rates by a quarter percentage point on Thursday, as Trump's tariffs weigh on global growth prospects, while central banks in Norway and Sweden are expecting to keep rates at unchanged levels.
"I think this simply indicates that markets are still not confident in the status of the U.S. dollar as a safe haven... investors are cautious about investing their money in the U.S.," said Krista Uston, head of research at Pepperstone.
"During that time, as the movement was caused by hedging against long-term investments, the fact that many say it is something that countries with a historically 'weak' and heavily managed currencies now turn to Trump through currency channels and whether they allow their applications to flow through trade negotiations," said Chris Uston, head of research at Pepperstone.
This deal was multilateral, approved by the Central Bank of Taiwan, yet the market remains unconvinced and sees a rise in the Taiwanese dollar as gaining its own silent approval, and also it can be expected to be preferred by the United States. Currencies like the Australian dollar and yen also benefitted from the decline, while this Australian dollar is now lingering close to a five-month maximum of Monday at a level of $0.6449. The yen declined to 143.99 against the dollar, but this was after a rise of 0.9% overnight.
The Chinese yuan in the internal market strengthened to the highest level since March 20—7.23 against the dollar, after the resumption of trading following a prolonged halt. These movements have further strengthened the perception of that investors are moving out of the U.S. dollar, triggered by the chaotic global tariff policy of President Donald Trump.
