Currencies
Taiwan Dollar Likely a Laggard in Potential Post-Fed Asian Rally
- Local firms have stronger incentives to hold the dollar
- New hedging rules for life insurers also cap currency’s upside
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Taiwan’s currency may again underperform its Asian peers in any rally after the Federal Reserve starts easing policy, given a considerable interest rate disadvantage and local firms’ stronger incentives to hold the dollar.
The Taiwan dollar rose 2.8% against the greenback in August, when the latter weakened globally after softer US data and shifting Fed rhetoric cemented expectations of a rate cut in September. The gains pale before those of top regional performers such as the Malaysian ringgit and Indonesia’s rupiah, both of which jumped at least 5%.