SYDNEY, May 5 — The U.S. dollar slipped further on Monday, pressured by a dramatic rally in the Taiwan dollar that sparked talk of currency revaluations across Asia, potentially aimed at gaining leverage in trade negotiations with Washington.
The Taiwan dollar surged over 3% to 29.618 per U.S. dollar, extending Friday’s record 4.5% jump and reaching its highest level in two years. Although Taiwan’s central bank denied any external influence from the White House, market sentiment hinted at coordinated currency moves among Asian economies.
Meanwhile, China’s yuan touched a near six-month high of 7.1980 per dollar, amid growing speculation that Beijing might allow a stronger yuan as a gesture in ongoing trade tensions with the U.S. However, substantial progress in talks remains elusive. China’s Commerce Ministry confirmed it’s reviewing a U.S. proposal to initiate negotiations regarding Trump’s new 145% tariffs, though gaps remain wide between both sides.
In a televised interview aired Sunday, President Donald Trump reiterated that China wanted a deal but provided no specific timeline. He also stated he wouldn’t remove Federal Reserve Chair Jerome Powell, but criticized him as a “stiff” and repeated his demand for lower interest rates.
Fed Meeting, Rate Cut Odds Shift
The Federal Reserve is set to meet Wednesday and is expected to keep interest rates unchanged following a strong March payroll report. JPMorgan’s Michael Feroli noted the data reduces the likelihood of a June rate cut, with markets now pricing in only a 37% chance, down from 64% a month earlier. Goldman Sachs and Barclays have shifted their expectations for a rate cut from June to July.
Despite solid job data, the dollar failed to gain momentum, with Asian markets subdued by holidays in Japan and China. The euro rose 0.3% to $1.1333, moving away from last week’s lows, while the dollar index dipped 0.2% to 99.717. The greenback also eased 0.4% to 144.21 yen, retreating from Friday’s peak of 145.91.
Japanese Finance Minister Katsunobu Kato backtracked on earlier remarks hinting at a possible sale of U.S. Treasury holdings as a bargaining chip in trade discussions.
Investor Confidence Wavers
Volatile U.S. policy decisions and perceived Fed pressure have rattled global trust in the dollar. Rising speculative short positions indicate growing bets on further dollar weakness, though they also raise the risk of a sudden short squeeze on any positive news.
All eyes are now on the ISM services index due later Monday, which could revive recession fears if it posts a weak reading.
Sterling, Aussie, and Other Global Moves
The British pound faces a key test Thursday at the Bank of England meeting, where a 25 bps rate cut to 4.25% is widely anticipated. Analysts expect the BoE to hint at further easing, possibly targeting a year-end rate of 3.50%.
Central banks in Norway and Sweden are expected to hold rates steady this week.
In Australia, the Aussie dollar stayed firm, buoyed by Saturday’s election victory for Labor Prime Minister Anthony Albanese, who secured a historic second term. The currency rose to $0.6466, reaching a five-month high following improved global risk sentiment after the U.S. jobs report.
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