Latest news with #Louis-VincentGave
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.'
CNBC
08-05-2025
- Business
- CNBC
AI hunger games, China's social experiment and ANT's return: Louis-Vincent Gave unpacks global order
Gavekal's Louis-Vincent Gave discusses issues ranging from China's stimulus push, U.S.-China policy divergence, the de-dollarization shift, and why China's AI race could crush margins — plus, why he believes Washington needs a deal more than Beijing.
CNBC
07-05-2025
- Business
- CNBC
"Eat like a bird but poop like a cow" - China expert on FX carry trade
Louis-Vincent Gave, cofounder of Gavekal Research talks about how investors playing the carry trade in Taiwan lost two years worth of gains in 72 hours and how the latest steps by the PBoC could help prop up Chinese stocks.
Roya News
06-05-2025
- Business
- Roya News
Asian economies reduce dollar use, fueling doubts about US assets
A surge in dollar sell-offs across Asia is raising questions about the long-term dominance of the US dollar, as major exporting nations reassess their reliance on American assets for investing trade surpluses. The trend, driven by regional currency gains and investor concerns over US trade policies, could mark the beginning of a broader shift in global finance. Regional currency surge The Taiwanese dollar sparked the movement, soaring 10 percent against the US dollar over Friday and Monday, its sharpest two-day gain in over a decade. This triggered a ripple effect, with currencies in South Korea, Malaysia, Singapore, China, and Hong Kong posting significant gains. Singapore's dollar neared a 10-year high, while Hong Kong's currency tested the upper limit of its peg to the dollar, prompting intervention by the Hong Kong Monetary Authority. By Tuesday, markets stabilized, but the episode underscored a growing capital shift toward Asia. Data from the International Monetary Fund shows that Asian economies, which collectively hold over USD 4 trillion in foreign exchange reserves, have historically parked much of their trade surpluses in US Treasury bonds and other dollar-denominated assets. However, recent moves suggest a pivot. Analysts point to US trade policies under President Donald Trump as a key catalyst. Tariffs and sanctions have disrupted global supply chains, prompting Asian exporters to diversify away from dollar-based assets. 'This feels like a reversal of the post-Asian financial crisis era,' said Louis-Vincent Gave, co-founder of Gavekal Research. 'In the late 1990s, Asia scrambled to amass dollars for stability. Today, that strategy is losing its appeal.' The concept of 'de-dollarization'—reducing reliance on the dollar in trade and reserves—is gaining traction. A Goldman Sachs report noted that Asian central banks have increased holdings of gold and regional currencies by 15 percent since 2023, signaling a hedge against dollar volatility. Meanwhile, China's push for yuan-based trade with ASEAN nations has accelerated, with yuan-denominated transactions rising 20 percent year-on-year, according to the People's Bank of China. Turning point or temporary blip? While the sell-off has fueled speculation about the dollar's decline, some argue its role as the world's reserve currency remains secure. 'The dollar still accounts for 58 percent of global foreign exchange reserves and 88 percent of international transactions,' said Jane Foley, head of FX strategy at Rabobank. 'De-dollarization is a slow process, and no single currency is ready to replace it.' Still, the shift in Asia could have lasting implications. If major economies reduce dollar holdings, demand for US Treasuries may weaken, potentially raising borrowing costs for the US government. For Asia, stronger regional currencies could boost purchasing power but may hurt export competitiveness.
The Hindu
06-05-2025
- Business
- The Hindu
'Asian crisis in reverse' as currencies soar on the dollar
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. 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 U.S. 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 U.S. President Donald Trump's aggressive tariffs, analysts said, rattling investors' confidence in the dollar and upending the flow of trade dollars into U.S. assets in two places. First, exporters especially in China can expect fewer receipts as tariffs cut access to U.S. customers. Second, fear of a U.S. downturn casts a shadow over U.S. asset returns. "Trump's policies have weakened the market's confidence in the performance of U.S. dollar assets," said Gary Ng, senior economist at Natixis. 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. Talk becomes reality 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 U.S. stocks and bonds by pension and insurance funds, which have tended to keep foreign exchange hedges small due to the costs involved. There are signs the dollar view is shifting from all corners. Goldman Sachs said in a note on Tuesday that investor clients had recently flipped from short yuan positions, to long positions, or in other words, they are shorting the U.S. dollar expecting further weakness. Robin Xing, Morgan Stanley's chief China economist, said Trump's April 2 "Liberation Day" tariff announcement was the wake-up call that forced investors to at least hedge, if they weren't selling, U.S. assets. "Over the mid- and long-term, I think people start thinking: how to diversify assets in the future, rather than be stuck in the outdated mentality of dollar supremacy." A popular trade that involved buying cheap U.S. dollars in the Hong Kong dollar forwards market, known in markets as the gift that never stopped giving, also went into reverse since it rested on the Hong Kong dollar staying still. "Macro funds and leveraged players have hundreds of billions of dollars in the HKD forwards free-money trade, and now they are unwinding," said Mukesh Dave, chief investment officer at Aravali Asset Management, a global arbitrage fund based in Singapore. Hong Kong's de-facto central bank said on Monday it has been reducing duration in its U.S. Treasury holdings and diversifying currency exposure into non-U.S. assets. Rallies in Asia's bond markets suggests exporters' and long-only money may be coming home, too. "Repatriation talk is becoming reality," said Parisha Saimbi, Asia-Pacific rates and FX strategist at BNP Paribas in Singapore, as investors and exporters are either unwinding or rushing to hedge. "Whichever format it comes in, it suggests that the support for the dollar is shifting and it's turning lower ... I think it speaks to this idea that there is a de-dollarization in action." UBS estimates that if Taiwan's insurance companies increased hedging ratios to their 2017-2021 averages, it could be worth some $70 billion in U.S. dollar selling. 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 U.S. 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 U.S. dollars and Asian central bank desire to support the U.S. dollar is waning."
