The sudden surge of the Korean won & Taiwan dollar, America's hegemony war hasn't even begun.

Over the past few days, the Korean won (KRW) experienced a sudden appreciation. The exchange rate surged from the 1,440 KRW range to the 1,370s. Similarly, the Taiwanese dollar (TWD) jumped to the low 31 range. These abrupt moves in the FX market suggest that something unusual is at play.

It's difficult to interpret these sharp appreciations purely through supply and demand. The U.S. is still holding interest rates at elevated levels. Taiwan is facing rising geopolitical tensions with China—some even speak of war preparation. South Korea remains a heavily export-driven economy. Under these circumstances, with tariffs increasing and global demand slowing, appreciation of these two currencies makes little sense without political motives.

▍A Political Signal Behind the Currency Move

Taiwan has recently strengthened its semiconductor alliance with the United States, and South Korea is actively engaging in supply chain partnerships across shipbuilding, semiconductors, and other strategic industries. In these negotiations, a rising theory is that the U.S. has applied exchange rate appreciation pressure as part of its strategic alignment. While stronger currencies damage export competitiveness, they help the U.S. lower import costs and stimulate reshoring.

In short, the U.S. is deploying a blend of geopolitical alliance, industrial cooperation, and currency policy to reengineer a dollar-based global order.

U.S. Strategy: Line Up the Allies, Draw in Capital

The U.S. is crafting country-specific strategies based on the degree of political alignment.

• Non-aligned or adversarial countries (China, EU):Encourage currency depreciation → trigger capital flight → redirect funds into U.S. Treasuries and dollar assets → stabilize Wall Street.

• Strategic allies (South Korea, Taiwan, Japan):Encourage currency appreciation → weaken export competitiveness → accelerate reshoring of manufacturing → strengthen Main Street.

• Geopolitically fragile regions (EU):Combine energy and defense vulnerabilities with a weak euro → increase reliance on U.S. energy and military infrastructure.

This approach constitutes a convergence of dollar hegemony, geopolitics, and capital flow control. The U.S. is not simply responding to markets—it is designing them.

Strategic Contradiction: Weakening Allies, Expecting Loyalty?

There’s a fatal flaw in this approach: the cost to America’s allies.

Currency appreciation undermines export-driven economies like Korea and Taiwan. As manufacturing shifts to the U.S., these nations face job losses and industrial hollowing. Security cooperation with the U.S. may continue, but economic pain invites political backlash. In democratic nations, governments cannot indefinitely suppress domestic discontent.

More critically, the U.S. changes leadership every four years. With Trump’s possible return, today’s policies may be reversed. Allies are aware that following Washington too closely exposes them to American political volatility. Many will appear compliant while quietly hedging their bets. China, in particular, stands to benefit from any fraying in the U.S.-led alliance network.

What the U.S. Must Do: Offer More Than Orders

To ensure strategic continuity, the U.S. must offer more than pressure. It must offer opportunity. If Washington wants allies to accept short-term economic losses, it must share the long-term gains.

1️⃣ Give Allies Access to the U.S. Market

China currently occupies nearly 50% of certain U.S. import segments. Replacing that market share with trusted allies—Japan, South Korea, Taiwan, Germany—could generate genuine economic incentives. Sectors like EVs, semiconductors, batteries, and healthcare should be opened to allied supply chains.

2️⃣ For Non-Allies, Provide a Clear Path to Participate

Total decoupling from China or the Middle East is unrealistic. The U.S. must define clear conditions for participation in its new economic order. Power built on exclusion eventually fractures. Power built on rules can endure.

Investor Perspective: What Now?

A wildly volatile FX market is never a good sign. Volatility reflects systemic uncertainty. And yet, markets are rising. Why? Because investors believe neither Trump nor the Fed wants a collapse.

This week’s FOMC will be pivotal. If Chair Powell delivers dovish signals, a short-term rally could continue. Trump, too, has refrained from hostile market rhetoric. The short-term may offer tactical gains.

But the strategic picture remains unstable. Trump aims to rewrite the game. That means volatility, noise, and risk. In this cycle, rallies are selling opportunities. Crises will offer better entries. A 1–3 month risk-on window may emerge—but we see it as a temporary trade, not a new trend.