Taiwan, Korea Lose as China Wins From Trump Jawboning on Dollar

  • Currency surges threaten growth in export-oriented economies
  • China’s yuan continues to depreciate versus Asian neighbors

Donald Trump’s preference for a weaker dollar rippled through currency markets on Thursday, with Taiwan’s dollar and South Korea’s won climbing at least 0.9 percent. That’s not great news for the export-oriented economies, especially when contrasted against the yuan’s relatively mild 0.2 percent move.

The Taiwan dollar and the won are "extremely strong," on a trade-weighted basis, said Eric Robertsen, head of global macro strategy and foreign-exchange research in Singapore at Standard Chartered Plc.

Against the yuan, the Taiwan dollar’s move is even more acute. China’s currency has tumbled 15 percent against its peer in just 18 months to trade near a six-year low.

A surging currency is a problem for companies like Taiwan Semiconductor Manufacturing Co., the world’s largest contract chipmaker, which reported Thursday its earnings fell short of estimates. Exports account for more than half of Taiwan’s gross domestic product.

With Beijing officials allowing the yuan to appreciate less than rivals when the U.S. dollar falls, a weaker greenback effectively means greater depreciation for China’s currency at a time when it’s seeking to bolster its economy. At the same, by keeping the yuan slightly stronger against the dollar, authorities can deflate investor concerns about devaluation and ease pressure for capital to flow out the country.

Thursday’s 1.1 percent gain for the won against the dollar came after tensions with North Korea had weighed on the Asian currency earlier in the week, meaning it’s still well within its recent trading range. Trump has backed down on labeling China a foreign-exchange manipulator, and is leaning on Xi Jinping to put pressure on the North to back off on its nuclear weapons and missile development.

— With assistance by Garfield Clinton Reynolds, and Emma Dai

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