Rumours of a deal
Low liquidity during the UK bank holiday didn’t shield the US Dollar from further selling pressure. Over the weekend and into Monday, rumours had been building that the US and Taiwan were nearing a trade deal. More than just a trade deal, rumour has it that Trump’s Mar-a-Lago playbook is on. That means that it is thought that progress so far on a US-Taiwan trade deal includes conditions for the active or designed weakening of the US Dollar. The Taiwanese Dollar, of course secured the biggest bid at market open yesterday but regional FX also outperformed.
It is not the rumours of a trade deal with Taiwan per se that forced the Dollar lower. Instead, it is the thought that should de-dollarisation, or just a persuasion to a weaker Dollar be present in any initial deal, it may likely serve as a blueprint for other more significant deals that may follow. Amidst the backdrop of stronger APAC FX, the Singaporean Dollar and Japanese Yen outperformed with AUD not far behind. The Chinese Renminbi, whilst a strong barometer for regional sentiment despite its active management, may have been hindered from reflecting local trade optimism due to similar bank holidays in China yesterday.
The rumour mill will have started churning far too late and quietly to have any expected impact upon the Fed’s decision making this week. Trump’s administration has been swift to downplay any such rumours including the suggestion that the US is seeking to devalue any assets including the Dollar. This was evident from Bessent’s comments yesterday that caught headlines.
Discussion and Analysis by Charles Porter
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