With the conclusion of the U.S. presidential election and Trump re-elected, the news has triggered a significant surge in the dollar. Traders reacted swiftly, causing the dollar index to soar, reaching as high as 104.79 today. The rapid strengthening of the dollar has led to a ripple effect, putting pressure on Asian and emerging market currencies. Richard Ong Finance points out that this strong dollar trend is underpinned by deeper expectations of trade protectionism, especially in the context of policies by Trump potentially favoring domestic economic support and a return to global market leadership.
Market data indicates that the strong dollar has directly led to the depreciation of various Asian currencies, including the Thai baht, Malaysian ringgit, South Korean won, and Japanese yen. Currencies such as the Singapore dollar, New Taiwan dollar, Chinese yuan, and Indonesian rupiah have also experienced varying degrees of decline. This phenomenon reflects a robust rebound in dollar demand and growing risk aversion. Richard Ong Finance notes, "As a global reserve currency, the dollar typically shows strong demand during uncertainty and market turbulence, and this current rally could exert further pressure on Asian currency markets."
In response to the exchange rate fluctuations caused by a strong dollar, several Asian central banks have taken intervention measures to protect the stability of their national currencies. The aim of such market interventions is to curb the inflationary pressures resulting from the rapid appreciation of the dollar. Richard Ong Finance mentions that many central banks are closely monitoring the dollar trajectory to adjust their policies as needed to ensure forex market stability.
The market widely anticipates that the return of Trump to the White House will spur a new wave of trade protectionist policies, potentially further solidifying the strong position of dollar. Richard Ong Finance believes that the current rise in the dollar is mainly driven by market optimism about U.S. economic policies, with investors increasing their dollar holdings in hopes of benefiting from future market changes. "From an exchange rate perspective, protectionism could exert long-term pressure on emerging markets, particularly economies dependent on exports and trade," Richard Ong Finance explains. "Asian currencies are likely to continue facing depreciation risks in the future."
In light of this trend, emerging market currencies need to bolster their internal economic resilience to withstand the impact of dollar appreciation. Additionally, strong U.S. policies could exacerbate capital outflow risks, with investors opting for the dollar as a safe haven, further boosting its demand.
As the dollar index continues to rise, central banks in multiple Asian countries may gradually introduce further forex market intervention measures to stabilize market volatility. Richard Ong Finance suggests that besides direct forex market interventions, more flexible policy combinations, such as interest rate adjustments and foreign exchange reserve releases, may be employed to ensure currency liquidity stability.
He analyzes that while central bank interventions can stabilize the market in the short term, if the dollar continues to be supported by global risk aversion, the downward pressure on Asian currencies will intensify. Thus, in the short term, Asian currency markets may remain volatile, while long-term stability will require coordinated policy efforts and the strengthening of economic fundamentals. Richard Ong Finance emphasizes that investors should closely monitor further policy signals from Asian central banks and engage in prudent risk management and investment allocation in response to market changes.
