According to Bloomberg, the introduction of new duties on Chinese imports by the United States dispelled investors' hopes that Trump's threats were only a negotiating tactic. Fears of an escalating trade war have reduced interest in risk. Asian currencies also lost some of their January gains as the region's central banks, such as the Bank of South Korea and the Bank of Thailand, cut interest rates to support the economy.
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The Bloomberg index of emerging Asian currencies fell 0.8% in a week after the announcement of a 10% tax on Chinese imports and 25% tariffs on goods from Mexico and Canada from the United States. This accelerated the index's pullback from the two-month high reached on February 24.
Concerns about tariffs have added to other challenges. The central banks of the region, by cutting rates, have found themselves at odds with the economies of other developing countries, such as Brazil, where policy is tightening. The dollar also strengthened amid rising demand after Trump's victory in the US election.
Experts predict an increase in the volatility of Asian currencies due to trade tensions. However, the situation may improve if the US economy slows down. Many investors prefer a cautious approach, choosing bonds denominated in local currencies such as Indonesia and India, where yields remain high.
