Latest news with #Gave
Gulf Today
08-05-2025
- Business
- Gulf Today
Asian investors' trust in dollar faces problems
A wave of dollar selling in Asia is an ominous sign for the greenback as the world's export powerhouse starts to question a decades-long trend of investing its big trade surpluses in US assets. Ripples from Friday and Monday's record rally in the Taiwan dollar are now spreading outward, driving surges for currencies in Singapore, South Korea, Malaysia , China and Hong Kong. The moves sound a warning for the dollar because they suggest money is moving in to Asia at scale and that a key pillar of dollar support is wobbling, according to Reuters. While Tuesday brought a measure of stability, following a stunning 10% two-day leap for Taiwan's currency, Hong Kong's dollar was testing the strong end of its peg and the Singapore dollar has soared close to its highest in more than a decade. 'To me, it has a very sort of Asian-crisis-in-reverse feel to it,' said Louis-Vincent Gave, founding partner of Gavekal Research, in a podcast, due to the speed of the currency moves. In 1997 and 1998, capital flight sank currencies from Thailand to Indonesia and South Korea and left the region determined to accumulate dollars in the aftermath. 'Since the Asian crisis, Asian savings have not only been massive, but they've had this tendency to be redeployed into US Treasuries. And now, all of a sudden, that trade no longer looks like the one-way slam dunk that it had been for so long,' said Gavekal's Gave. Traders in Taiwan had reported difficulty executing trades, such was the one-sided wave of dollar selling, and speculated it had been at least tacitly endorsed by the central bank. Dealers said volumes were heavy in other Asian markets. At its heart, the break has been triggered by US President Donald Trump's aggressive tariffs, analysts said, rattling investors' confidence in the dollar and upending the flow of trade dollars into US assets in two places. First, exporters especially in China can expect fewer receipts as tariffs cut access to US customers. Second, fear of a US downturn casts a shadow over US asset returns. Some are speculating on what markets have termed a 'Mar-a-Lago agreement,' he said, or a deal – named after Trump's gilded Florida resort – to weaken the dollar. Taiwan's Office of Trade Negotiations denied tariff talks in Washington last week had involved the topic of foreign exchange. Asia's biggest piles of dollars sit in China, Taiwan, South Korea and Singapore, which combined number in the trillions. In China alone, foreign currency deposits at banks – mostly dollars and largely held by exporters – were $959.8 billion at the end March, the highest in nearly three years. On top of that are layered investments funded in these currencies, which have low borrowing costs by global standards and investments in US stocks and bonds by pension and insurance funds, which have tended to keep foreign exchange hedges small due to the costs involved. Hong Kong's de-facto central bank said on Monday it has been reducing duration in its US Treasury holdings and diversifying currency exposure into non-US assets. Rallies in Asia's bond markets suggests exporters' and long-only money may be coming home, too. To be sure, Taiwan's central bank has vowed to stabilise the local currency and even the island's president took the unusual step of recording a video message to insist the exchange rate was not part of US trade talks. Still, the market seems to be voting with its wallet.'USD/TWD is a canary in the coal mine,' said Brent Donnelly, veteran trader and president at analytics firm Spectra Markets. 'Asian demand for US dollars and Asian central bank desire to support the US dollar is waning.'
CBS News
29-01-2025
- Business
- CBS News
As Trump's tariffs loom, analysts say China is better prepared than ever for a trade war with the U.S.
Hong Kong — The pounding of drums has rung out across China this week, intended to ward off evil spirits in a centuries-old tradition as the Chinese welcome the lunar new year. This year, new year hopes for prosperity are of even greater importance, as China braces itself for Trump 2.0. "China hopes for the best and prepares for the worst," Dr. Henry Wang, an adviser to the Chinese government and the founder and president of the Center for China and Globalization, told CBS News. He said officials in Beijing were deeply concerned by President Trump's rhetoric on the campaign trail. Mr. Trump threatened, before taking office, to impose tariffs of up to 60% on all Chinese imports. That hasn't come to pass, but tariffs of 10% on all Chinese goods exported to the U.S. are set to kick in on Saturday — and Mr. Trump has indicated that could be just a warning shot. In an interview last week, he called tariffs America's "one very big power over China." But Mr. Trump could be dealing with a very different economic competitor than he was the last time he called the White House home. Analysts say China is now less reliant on the U.S. and far more economically self-sufficient, dominating key industries such as electric vehicles and the manufacture of the batteries that power EVs and so many other consumer devices, along with drones and solar panels. "You're seeing an absolute epic boom in industry, because the reality is that China today is probably more productive than any economy has ever been," research analyst Louis-Vincent Gave told CBS News. He said the world's second largest economy is now better insulated for a trade war with the U.S. Gave also said the stunning news that Chinese AI company DeepSeek has matched, if not surpassed, U.S. AI models served to underscore the fact that China should no longer be underestimated. "The idea we're going to win a tech war with China over 10-20 years, when all the kids being trained today in technology are Chinese," Gave said, "is madness." Trump administration officials, lawmakers and cybersecurity experts have voice concern that the DeepSeek technology could pose a national security threat to the U.S. Nobody at the company's offices in China has been willing to speak with CBS News. Although China appears less vulnerable to U.S. strong-arming than during Mr. Trump's first term, steep new tariffs would hurt, Wall Street analysts have said. Paul Ashworth, chief North America economist at Capital Economics, noted in a report to investors that the U.S. accounts for only 7% of exports to China. That would give Beijing less scope to retaliate than either Canada or Mexico, which Mr. Trump has threatened with 25% tariffs from Feb. 1, and which are more important markets for U.S. exporters. A trade war with the U.S. would also come as China faces slowing economic growth, putting additional pressure on Chinese leaders. Chinese citizens, meanwhile, are hoping for warmer relations with the U.S., but no one is under any illusions. Asked if she believed Mr. Trump would work with China, a young woman on the ferry between the mainland and Hong Kong told CBS News that the American leader seemed to put "great importance on his own interests." As prayers are offered across Asia for the Year of the Snake, many people in China know what's at stake. Wang, the Chinese government adviser, said if the two global economic powerhouses fail to work out their differences, "I think it's going to be very devastating to the world, not just the U.S. and China. The world doesn't want to have to pick sides."
