Hong Kong’s de-facto central bank said earlier in the day it bought US$7.8 billion (HK$60.5 billion) to stop the local currency from strengthening and breaking its peg to the US dollar.
Investors were also awaiting actual progress in trade negotiations with the US and evidence of a thaw in Sino-US relations, as opposed to just hints from officials.
The Taiwan dollar on Monday surged to a three-year high of 29.59%, having leapt 8% in two days, in a move which coincided with the end of US-Taiwan trade talks in Washington. It was last steady at 30.02 per dollar.
“While the move has been driven by hedging activity from lifers, the factor many talk about is whether these countries with historically ‘weak’ and heavily managed currencies are now appealing to Trump through the currency channels and are now allowing for an appreciation of the currency as part of the trade negotiations,” said Chris Weston, head of research at Pepperstone.
Such a deal has been repeatedly denied by Taiwan’s central bank, but the market is not entirely convinced and sees the Taiwan dollar’s jump having its tacit approval, as well as likely to be welcomed by the US.
Currencies like the Australian dollar and the yen also benefited from the fallout, with the Aussie last hovering near Monday’s five-month high at US$0.6449.
The yen was slightly weaker at 143.99 per dollar, but that followed a 0.9% surge overnight.
China’s onshore yuan strengthened to its highest level since March 20 at 7.23 per dollar, following the reopen of trade after an extended break.
The moves further reinforced the narrative of investors falling out of favour with the US dollar, triggered by president Donald Trump’s chaotic global tariff policy.
“US Treasury yields are basically back to where they were prior to ‘Liberation Day’, but the US dollar is still sharply weaker,” said Carol Kong, a currency strategist at Commonwealth Bank of Australia.
“I think that just indicates that markets are still unsure of the US dollar’s safe-haven status… investors are wary of putting their money into the US dollar.”
Against a basket of currencies, the dollar was up 0.2% at 100.04. The dollar index had clocked a monthly decline of 4.3% last month, the largest in over two years.
The Federal Reserve announces its policy decision on Wednesday and is expected to keep rates on hold, but the meeting may be the last where the outcome is so cut and dry.
Elsewhere, the euro fell 0.25% to US$1.1287, while sterling eased 0.24% to US$1.3265.
The New Zealand dollar was down 0.3% at US$0.5949.
The Bank of England also meets this week and is expected to lower interest rates by a quarter point on Thursday as Trump’s tariffs darken the global growth outlook, while central banks in Norway and Sweden are expected to keep rates steady.