| The sharp volatility in Asian currencies this week shows the end of US exceptionalism is causing ripple effects all over the world. While the Taiwan dollar has been in the spotlight, with wild swings this week forcing an emergency briefing by the central bank, there’s also been strong gains in the Japanese yen and Malaysian ringgit. All that pressure is leading to some authorities to push back against any rapid appreciation of their currencies. Beijing signaled its determination to keep the yuan relatively stable as the People’s Bank of China kept its daily reference rate steady. Over in Hong Kong, authorities ramped up efforts to defend the peg. China’s economic clout means the yuan is seen as an anchor for currencies across the region, with a stable yuan reducing the chances of extreme moves elsewhere in Asia. “They have no desire to allow the yuan to strengthen in anticipation of a trade deal which may not eventuate, or at the very least is still some way off,” wrote Khoon Goh, head of Asia research at Australia & New Zealand Banking Group. Those efforts seem to be working for now. As Mary Nicola, a Bloomberg macro strategist writes: “The latest pullback in Asian currencies underscores a familiar truth: any sustained rally in the region’s FX complex hinges on a stronger Chinese yuan.” She highlighted the fact that the currency’s modest fixing has helped drive a broader pullback today. The Malaysian ringgit — one of the biggest gainers in the previous sessions — is leading declines across Asia. The Taiwan dollar is also more subdued. Still, the episode highlights how the broad shift away from US assets is still playing out, with the potential to cause some very sharp moves. “This fits into a more worrying bearish narrative for the dollar,” writes ING Bank strategist Francesco Pesole. “And opens up a risk that a period of supposedly dollar-positive trade deals with Asian countries may turn into an opportunity for dollar-rich Asian countries to reduce dollar exposure.” —Lynn Thomasson | 
