Over recent days, the Taiwan dollar has staged a dramatic rise, surging nearly 10% in just two sessions. That movement has rippled across the region, strengthening the Singapore dollar, South Korean won, Malaysian ringgit, and Chinese yuan. Even the Thai baht, long seen as a relatively stable currency, has appreciated significantly — climbing from 34.88 to 32.62 per dollar in the span of a month.
These currency movements hint at more than just technical fluctuations. They suggest that a substantial flow of capital is heading back into Asia, undermining one of the dollar's traditional pillars: the consistent reinvestment of Asia’s trade surpluses into U.S. assets, especially Treasuries.
Louis-Vincent Gave, founding partner at Gavekal Research, likens the momentum to a reverse of the 1997-98 Asian Financial Crisis. Then, capital flight devastated Asian currencies and spurred a long-term buildup of dollar reserves. Now, it appears some of those very reserves may be heading home.
“Since the Asian crisis, Asian savings have not only been massive, but they’ve had this tendency to be redeployed into US Treasuries,” Gave noted. “And now, all of a sudden, that trade no longer looks like the one-way slam dunk that it had been for so long.”
In Taiwan, the dollar selling has been so pronounced that traders reported difficulty executing trades — a sign of how one-sided the market has become. Dealers across Asia noted heavy volumes, sparking speculation that central banks are at least tacitly permitting the moves.
At the root of the shift, analysts say, are growing doubts about the reliability of U.S. policy and economic prospects. Former President Donald Trump’s aggressive tariff policies are being blamed for eroding trust in the dollar's future. Exporters, particularly in China, face reduced demand from American consumers, while broader fears of a U.S. slowdown are making American assets less attractive.
“Trump’s policies have weakened the market’s confidence in the performance of US dollar assets,” said Gary Ng, senior economist at Natixis. He noted speculation around what’s being called a “Mar-a-Lago agreement” — an unconfirmed idea that the U.S. might be deliberately pursuing a weaker dollar to stimulate exports.
Although Taiwan’s Office of Trade Negotiations denied that recent talks with Washington involved currency matters, the signs point toward a broader trend. Foreign currency deposits — mainly dollars — held by Chinese banks reached nearly $960 billion in March, the highest in three years. Meanwhile, regional investors appear to be shifting those funds into local bond markets or repatriating capital altogether.
Investment houses are also adjusting their strategies. Goldman Sachs recently noted that clients have flipped from short positions on the yuan to long — a clear signal that many now expect the dollar to continue weakening. In Hong Kong, a popular arbitrage trade exploiting the stability of the local currency peg to the dollar has started to unravel, as volatility returns and the long-standing assumption of dollar strength begins to falter.
According to Mukesh Dave, chief investment officer at Aravali Asset Management in Singapore, “Macro funds and leveraged players have hundreds of billions of dollars in the Hong Kong dollar forwards free-money trade, and now they are unwinding.”
Hong Kong’s de facto central bank has responded by trimming its exposure to U.S. Treasuries and broadening its currency holdings — another signal of diversification away from the greenback.
Bond rallies across Asia further underscore this realignment, suggesting long-term investors and exporters are bringing money back home. “Repatriation talk is becoming reality,” said Parisha Saimbi, strategist at BNP Paribas, adding that the narrative of de-dollarisation is increasingly supported by real capital flows.
UBS estimates that if Taiwanese insurers alone reverted to their pre-2022 hedging practices, it could prompt as much as $70 billion in U.S. dollar sales. While Taiwan’s central bank has pledged to stabilise its currency, and President Tsai Ing-wen has publicly denied any link to trade negotiations, market actions appear to be telling a different story.
Veteran trader Brent Donnelly perhaps put it best: “The US-Taiwan dollar exchange rate is a canary in the coal mine. Asian demand for US dollars and Asian central bank desire to support the US dollar is waning.”
The greenback isn't collapsing — but the longstanding assumptions that have supported its supremacy are being tested. For the first time in a generation, Asia may be casting a vote of no confidence in the U.S. dollar — and doing it with its wallet.