Alexander Gloy's Linkedin Analytics

The #Taiwan dollar strengthened the most against the US dollar since at least 1980. Some call it a "15-sigma" event, a statistical term for a very unlikely event. So rare, that you wouldn't expect it to have happened during the life of the universe. Why did the TWD move so quickly? - CNH, the offshore Chinese Yuan, strengthened around 1% last Friday (when Chinese markets were closed for May 1st holiday), triggering strength in other Asian currencies - Due to a large trade surplus with the US ($75 billion) Taiwan experiences large inflows of US dollars. They were 'recycled' into US assets (mostly bonds) to avoid upwards pressure on the Taiwanese currency. - Taiwanese life insurance companies are holding many assets in US dollar. Mostly unhedged to avoid hedging costs. It seems there was some panic-selling of USD versus TWD. Shares of the largest Taiwanese life insurance companies (Cathay and Fubon) fell 6-7%. - Taiwanese life insurers hold around 14% of the market for longer-term US corporate bonds. Their assets are in USD, their liabilites (mostly) in TWD - a classic currency mismatch between assets and liabilities. - Relative to GDP, Taiwan has the second-largest financial system in the world. The life insurance industry's assets amount to 145% of GDP. Taiwanese banks account for 12% of all trading volume in the Fed Funds market. => These currency moves, combined with another strong gain for gold, suggest there is more strain among the tectonic plates of global currencies, with possible reverbrations on bond and stock markets.