An ‘Asian crisis in reverse’ as currencies soar on US dollar

A wave of dollar selling in Asia is an ominous sign for the greenback as the world’s export powerhouse starts to question a decades-long trend of investing its big trade surpluses in US assets.

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Ripples from Friday and Monday's record rally in the Taiwan dollar are now spreading outwards, driving surges for currencies in Singapore, South Korea, Malaysia, China and Hong Kong.

The moves sound a warning for the dollar because they suggest money is moving in to Asia at scale and that a key pillar of dollar support is wobbling.

While yesterday brought a measure of stability, following a stunning 10% two-day leap for Taiwan’s currency, Hong Kong's dollar was testing the strong end of its peg and the Singapore dollar has soared close to its highest in more than a decade.

“To me, it has a very sort of Asian-crisis-in-reverse feel to it,’ said Louis-Vincent Gave, founding partner of Gavekal Research, in a podcast, due to the speed of the currency moves.

In 1997 and 1998 capital flight sank currencies from Thailand to Indonesia and South Korea and left the region determined to accumulate dollars in the aftermath.

“Since the Asian crisis, Asian savings have not only been massive, but they've had this tendency to be redeployed into US Treasuries. And now, all of a sudden, that trade no longer looks like the one-way slam dunk that it had been for so long,” said Mr Gave.