Taiwan’s Carry Trade Blowup Means Bigger Dollar Trouble
The tide is going out first in export-oriented Asia.
At the beach in New Taipei City.
Photographer: I-Hwa Cheng/BloombergIn a week of tributes to Warren Buffett, here’s one from me, in the form of stealing one of his best aphorisms: Only when the tide goes out do you discover who’s been swimming naked.
The currency market is getting a view of that just as traders question the dollar’s dominance and whether the greenback is in a structural decline. Taiwan is among the first left exposed. Its dollar rose as much as 5% against the US currency on Monday, the most since 1988, and has rallied about 8% this year.
Fingers have pointed to idiosyncratic factors, such as thin market liquidity and speculation that Washington asked the island to lift the value of its currency as part of a trade deal, which authorities have denied. Traders may have been spooked by South Korea’s acknowledgement in late April that the exchange rate was one of the four major items to be discussed in future trade talks with the White House. And it’s no secret that President Donald Trump wants a weaker dollar.