Taiwan Moved, Asia Followed, China Reacted—Exactly as America Wanted

In my May 6 post, “KRW Surges Suddenly – The U.S. Hegemonic War Hasn’t Even Begun,” I noted that the recent forex movements were not simply market-driven reactions to supply and demand. Rather, they signal the opening moves in a U.S.-led realignment of the global dollar system. The simultaneous revaluation of Asian currencies marks the beginning of this design.

The Taiwanese dollar (TWD) has appreciated more than 10% in just one week—an exceptional move under any standard. Such sharp appreciation cannot be explained by conventional market flows. Instead, it aligns neatly with the strategic interests of the United States.

The Trump administration has long advocated for a combination of strong dollar and low interest rates. The strategy is straightforward: low interest rates to stimulate domestic growth and reduce capital costs, and a strong dollar to attract global capital and temper inflation. But for this to work, America needs its trading partners’ currencies to strengthen, increasing their purchasing power for U.S. goods.

Revalued foreign currencies serve two functions: they make U.S. exports more affordable abroad and reduce America’s import volume—both of which improve the U.S. trade balance and strengthen growth. TWD’s rapid rise, therefore, is not random; it is a deliberate strategic trigger that aligns with U.S. goals.

What's striking is that the TWD surge did not occur in isolation. The Korean won, Japanese yen, Singapore dollar, and Indian rupee also strengthened. This synchronized appreciation stems from how global macro hedge funds and institutional investors view Asia: as a single investment bloc. When TWD appreciates, they instinctively apply similar positioning to neighboring currencies. With the dollar weakening, these correlated trades intensify—which may also be exactly what Washington intended.

This collective revaluation places structural pressure on China. For years, major pension funds and institutional investors in Korea, Japan, and Taiwan have allocated capital to Chinese markets. But when their home currencies surge—especially by 10% in a matter of days—the potential for serious FX losses in Chinese yuan (CNY)-denominated assets grows sharply. To mitigate this risk, institutional investors may begin unwinding Chinese positions and repatriating funds. This creates liquidity risk in China—a situation the U.S. may have actively sought.

Anticipating this, Beijing responded quickly. Today, China announced a cut in the required reserve ratio (RRR), hinted at possible rate cuts, and declared new stimulus measures to boost domestic consumption. These aren’t typical easing moves—they’re defensive. The goal is to restore the appeal of Chinese assets before capital flees.

Ironically, this too fits precisely into America’s broader strategy.

Trump has spoken of a “beautiful adjustment.” What he means is this: China consumes more, the U.S. produces more. In other words, Washington wants China to stimulate domestic demand—so that America can resolve its trade deficit and secure future demand for its goods. As China consumes more and dips into its foreign exchange reserves, the dollar’s centrality is reinforced. By pulling just one lever—TWD revaluation—the U.S. has triggered capital flows, nudged Chinese monetary policy, and advanced its currency dominance.

How Should Investors Respond?

With this geopolitical puzzle unfolding, we must now look at the market with a strategic investor’s lens.

China has reacted to TWD-driven volatility with liquidity expansion and stimulus. Meanwhile, despite its political noise, the U.S. macro data remains strong: jobs data is stable, and GDPNow shows a solid 2.2% growth projection. The next key variable is the upcoming FOMC. A rate cut is unlikely, but if a dovish message is delivered, the combination of Chinese liquidity, U.S. stability, and subdued inflation could trigger a short-term market rally.

But as K3 Lab has emphasized repeatedly—this rally should be used to exit, not to enter. This is a liquidity-driven window, not a structural bull market. The wise investor understands when price rises are the result of strategy, not fundamentals.

What we are witnessing is not just volatility. It is the unfolding of a currency war shaped by geopolitical design. In such a war, the key question isn’t “what is the price?” but “who designed the move?”