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Asian currency rally offers rare lift for won, the region’s underdog

Published: 06 May. 2025, 19:04

A digital screen displays stock market figures inside the dealing room at Hana Bank's headquarters in Jung District, central Seoul, on April 29. [NEWS1]

Asian currencies have sharply appreciated against the greenback as investors continue to pull money from the United States over concerns of an economic slowdown. A dramatic surge in the New Taiwan dollar led the regional rally, pushing the Korean won into the 1,370 range against the dollar in offshore trading, rising in value from the 1,400 level that had persisted for nearly five months.

According to the Korea Center for International Finance on Tuesday, one-month non-deliverable forward (NDF) trading in New York on Monday showed the Korean won closing at 1,372.9 won per dollar.

In comparison, the Korean won had ended overnight trading in Seoul at 1,401.5 won on Friday. The 28.6 won increase in value, which is equivalent to a drop in the exchange rate, signals a likely stronger won when markets reopen on Wednesday following a public holiday.

Since December, the weekly closing exchange rate had remained in the 1,400 range. The latest movements suggest a possible turning point.

Taiwan led the gains across Asia. Its currency jumped 4.37 percent against the dollar on Friday, followed by a further 5.46 percent increase on Monday. Bloomberg reported that the currency recorded its biggest two-day gain since 1988.

Although Taiwan’s central bank intervened on Tuesday to temper the surge, leading to a slight pullback, the broader Asian currency market had already reacted.

Expectations that Taiwan would allow its currency to strengthen in support of tariff negotiations with the United States have driven up the value of the New Taiwan dollar. Speculation also grew that the United States could have directly asked Taiwan to revalue its currency. A stronger currency could help a major export-driven nation like Taiwan reduce its trade surplus with the U.S.

Adding to the upward pressure, Taiwanese life insurers — heavy holders of U.S. Treasury bonds — began hedging to prepare for a weaker dollar. As dollar-denominated bondholders, they risk losses if the greenback depreciates, prompting them to sell dollars and buy New Taiwan dollars.

Bank of Korea Gov. Rhee Chang-yong speaks to reporters at a hotel in Milan, Italy, on May 6 in this photo provided by the central bank. [YONHAP]

“The rally in Taiwan’s currency has the potential to spill over to the rest of the developing world,” said Brad Bechtel, global head of foreign exchange at U.S. investment bank Jefferies.

“Or it portends some sort of currency agreement between the U.S. and China, or the U.S. and the region, that will result in all Asian currencies strengthening.”

On Monday, the Chinese renminbi reached its highest level since last November. The Japanese yen also strengthened, trading at around 143 yen per dollar.

As the unexpected currency rally unfolds, central banks and financial authorities across the region have stepped up interventions. A weaker dollar generally reduces export competitiveness — a concern for export-driven economies.

Taiwan’s central bank not only intervened in the market, but also reportedly asked foreign investors and major exporters to refrain from aggressively selling dollars. Hong Kong’s financial authority conducted its largest-ever sale of the Hong Kong dollar in response to the fluctuations.

In Korea, concerns over won volatility prompted a measured response.

“There are pros and cons to any direction the exchange rate moves,” Bank of Korea Gov. Rhee Chang-yong said. “A higher exchange rate [weaker won] benefits exports, while a lower rate [stronger won] supports imports — so managing volatility is key. At this stage, it is difficult to predict which way the exchange rate will go.”

Translated from the JoongAng Ilbo using generative AI and edited by Korea JoongAng Daily staff.
BY JEONG JIN-HO [[email protected]]