The View | Stronger Asian currencies a mixed blessing for region’s property markets

While currency appreciation may provide relief for property investors, economies reliant on trade and tourism should proceed with caution

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A woman enjoys the skyline of Tokyo, Japan, on August 28, 2024. Photo: AFP

Published: 4:30pm, 19 May 2025Updated: 5:34pm, 19 May 2025

When US President Donald Trump announced now-suspended swingeing “reciprocal” tariffs on nearly all America’s trading partners on April 2, Asian economies – which account for seven of the 10 economies with the largest bilateral trade surpluses with the United States – were singled out for punishment.

To some currency analysts, Trump’s tariff blitz added to the strain on the region’s currencies, which had caused the Bloomberg Asia Dollar Index – a gauge of the performance of leading Asian currencies against the US dollar – to fall to a 19-year low in early January.

Yet shortly after Trump unveiled his tariffs, Asian currencies began to appreciate in one of the most unexpected developments in markets since the onslaught of protectionism began. Bloomberg’s Asian currency index is up over 3 per cent since April 9 despite numerous climbdowns on trade by Trump.

The combination of the drop in the US dollar due to concerns about its safe-haven status, Asian companies’ sudden unwinding of some of their unhedged holdings of dollar assets, and speculation that Asian governments will allow their currencies to appreciate to avoid punitive tariffs, has reversed a long period of currency weakness in the region.

This could be a foretaste of things to come. In a report on May 6, Eurizon SLJ Capital said US dollar “hoardings by Asian exporters and institutional investors may be extremely large – possibly in the order of US$2.5 trillion or so – and pose sharp downside risks to the dollar vis-a-vis [several] Asian currencies. This is the ‘avalanche risk’ we have been warning about since late 2022.”

Whether this is the start of a prolonged decline in the US dollar is debatable. What is clear is that upwards pressure on Asian currencies has significant implications for the region’s property markets.