The US stocks plummeted on Monday and the US dollar fell sharply last week, as the trade war sparked by Trump raised concerns about the risk of a US economic recession, heightening market risk aversion. Trump also acknowledged in a weekend interview that economic reforms would have a temporary transition period and did not rule out the possibility of a recession, shocking the stock and currency markets.

Rising Recession Risks in the US, US Dollar Plummets

The impending trade war has made the market pessimistic about the US economy and the US dollar. In the foreign exchange futures market, investors have reduced their net long US dollar positions from a nine-year high of $35.2 billion in January to $15.3 billion.

The US dollar has been weakening in recent weeks, with the US Dollar Index falling more than 3% last week, its worst weekly performance since November 2022, closing at 103.59, not far from the four-month low of 103.58 reached earlier.

The heightened risk aversion of investors is also reflected in the US bond market, as funds have flooded into the safe-haven of US Treasuries, pushing the yield on the 10-year US Treasury to 4.18% today, a new low for the year. The recent sharp drop in yields is also seen by analysts as putting pressure on the US dollar.

Japanese Yen Hits 5-Month High

In contrast to the plummeting US dollar, the Japanese yen and Swiss franc have become the market's preferred safe havens, with the two major safe-haven currencies surging to multi-month highs in recent days.

On the 10th, the Japanese yen rose to 146.64 against the US dollar, a 5-month high since last October, a sharp rise of over 7% from the January low of 158.33; the Swiss franc also rose to a three-month high of 0.87625 against the US dollar on Monday.

Taiwan Dollar to Japanese Yen Exchange Rate Hits Near Half-Year Low, May Test 0.23?

The surge in the Japanese yen has also made it increasingly difficult for Taiwanese people who have been hoping for a sweet exchange rate recently. According to the historical posted exchange rates of Bank of Taiwan, the Japanese yen to New Taiwan dollar exchange rate has been rising continuously since the 5th, reaching 0.2274 at one point today (11th), the highest level in nearly half a year since September 18th last year.

This means that compared to the "0.2046" super sweet exchange rate last July, exchanging 100,000 New Taiwan dollars would get you almost 50,000 Japanese yen less, equivalent to 2 Tokyo Disneyland tickets. Analysts say that unless the central bank intervenes to stop the yen's appreciation, the Japanese yen to New Taiwan dollar exchange rate has a good chance of testing the "0.23" level.

Nomura Securities analysts remain bullish on the Japanese yen's continued strength, as they believe the results of the "Shunto" wage negotiations to be announced on the 14th will consolidate the wage inflation cycle, allowing the Bank of Japan to maintain its hawkish stance. The market currently generally expects the BOJ to keep rates unchanged at its March 18-19 meeting, with the earliest rate hike expected in May.

Due to the recent slowdown in the US economy and job market, the contrast with Japan's economic recovery, as well as market bets on further BOJ rate hikes and heightened global risk aversion, foreign banks do not rule out the possibility of the Japanese yen rising above 145 against the US dollar in the coming weeks.