Analysis: How U.S. Election Outcome Has Affected Foreign Exchange Markets

TaiwanPlus News

With the U.S. dollar and bitcoin surging on the back of Donald Trump's election victory, TaiwanPlus talks with financial sector executive Chris Cottorone to find out how the foreign exchange market is impacting Taiwan and markets globally.

Transcript

00:00In the weeks since the election in the United States, the U.S. dollar has performed very

00:05well compared to the Chinese Yuan and the Euro.

00:09Could you explain a little bit about why this is happening?

00:11Remember, Donald Trump, too, I think, sees as one of his key success advantages being

00:15unpredictable.

00:16So a lot can change.

00:18But I think a lot of the U.S. dollar strength is obviously coming from his election victory,

00:23the fact that he wants to bring jobs back on shore and empower the American economy.

00:26So that's obviously going to be positive.

00:28And keep in mind, too, before the election, the United States economy was actually one

00:33of the better ones in the world.

00:34It wasn't in recession.

00:35It wasn't overheating.

00:36I think for the Chinese Yuan, the renminbi, I think it's pretty clear that the impact

00:41is, one, of course, what the potential impact of Trump's possible tariffs on the Chinese

00:46economy would be, and also, two, the fact that the Chinese economy is still performing

00:52fairly weakly in terms of GDP growth and also consumption.

00:55For the euro, that's a little bit more standard in terms of the economy there is not performing

00:59as well as the U.S. economy.

01:01Also, too, they are also watching what's going on in terms of the U.S. Fed and its possible

01:06rate cuts, maybe not as many rate cuts as possible or what they maybe thought.

01:11What effect might these currency valuations have on Taiwan and its exports and imports?

01:17You know, an NT dollar that's weaker versus the U.S. dollar means that probably Taiwan's

01:20exports will actually become more competitive.

01:23Now, that sounds great, but of course, there's some headaches involved there, too, because

01:26it might mean that the trade surplus that Taiwan enjoys with the U.S. may be larger.

01:32And also, too, the fact that you have to consider that these companies that are going to probably

01:37expand their investments and also their, let's say, even build plants in the United States,

01:43it'll become more expensive for them to do that because, remember, the NT dollar is weaker

01:47against a stronger U.S. dollar.

01:49However, you know, the United States and Taiwan have a very strong trade relationship.

01:54Even if the United States has a trade deficit with Taiwan, a lot of the exports that Taiwan

01:59is sending is, remember, these are high tech exports going to the United States.

02:02They're improving America's ability to export as well to build its own industrial base.

02:07One of the other currencies we have seen surge since the U.S. election is actually the digital

02:11currency Bitcoin, a currency which Donald Trump promised to regulate during his campaign.

02:18What might he be seeking to accomplish with these regulations?

02:23I think that he's looking at and I think the voters are looking at him coming in and saying

02:26this is a new way to kind of empower the average person, the average investor.

02:32I think he's looking at a couple of things.

02:34One is he's looking at, let's say, for example, China, which was doing a lot of work in trying

02:38to build their own national kind of stable currency, other markets as well, too.

02:44And I think he wants to have the regulatory agencies to kind of support it.

02:48Up until now, we've seen a lot of the central banks and regulatory agencies, even the United

02:52States, be rather cautious on developing that.

02:54So I expect he's going to continue to try to find ways to make cryptocurrency more relevant

03:01as an investment, as a currency for U.S. investors and for the global investors, and also to

03:08have the United States play a role in that so investment flows into the United States

03:11for this industry rather than have U.S. investors go outside the United States to invest in

03:16it.

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