Analysis-Why China's neighbours may want currency deals with Trump

By Rae Wee and Vidya Ranganathan

SINGAPORE (Reuters) -As the currencies of South Korea, Taiwan and Japan rise, truthful excessively is chatter that these economies could usage speech complaint revaluation arsenic a carrot successful commercialized talks with U.S. President Donald Trump.

While a stronger currency has historically meant a competitory disadvantage for these Asian exporters, revaluation whitethorn present beryllium the slightest costly bargaining spot successful their scramble for favourable trading presumption with the U.S.

The Korean won surged this week aft officials determination said currency argumentation was discussed astatine a gathering they had successful Milan with U.S. officials connected May 5. That comes conscionable days aft U.S.-Taiwan talks triggered an unprecedented 8% surge successful the Taiwan dollar.

Japan's concern curate is meantime seeking to conscionable U.S. Treasury Secretary Scott Bessent astatine the G7 meetings successful Canada adjacent week to sermon overseas exchange.

Market participants person been speedy to link these developments with China's astonishment 90-day commercialized truce with United States connected the play astatine Geneva.

"This China woody is precise atrocious quality for Korea, for Japan, for anybody waiting successful the queue, due to the fact that present they request to connection what China managed to avoid," said Alicia Garcia-Herrero, main economist for Asia Pacific astatine Natixis.

She believes Taiwan whitethorn person agreed to revalue its currency arsenic portion of commercialized negotiations, portion China pushed backmost against specified a request.

The timepiece is ticking for export-reliant Asia. Trump's April 2 reciprocal tariffs, ranging from 25% for South Korea to 46% for Vietnam, were suspended for 90 days but could footwear successful connected July 8, unless deals are struck.

There is greater urgency for China's contiguous neighbours Japan, Korea and Taiwan, which hazard being displaced from semiconductor and autos proviso chains arsenic China and India expedite negotiations with Trump.

China, Japan, South Korea, Singapore, Taiwan and Vietnam are besides among the economies connected the U.S. Treasury's "monitoring list" for currency practices - thing Trump's squad could usage arsenic a talking constituent successful negotiations.

"The Koreans mightiness think, 'well really a stronger currency is successful our involvement and truthful we whitethorn arsenic good suggest this successful these negotiations'," said HSBC's main Asia economist Fred Neumann.

"These currency angles are lone coming up successful definite negotiations and not successful others, possibly due to the fact that the U.S. is not insisting connected it, but it's truly the different state that has brought them successful arsenic a mode to benignant of appease U.S. demands."

TAIL WAGGING THE DOG

Trump and Bessent person some expressed a penchant for a beardown dollar, though that has done small to squelch suspicion that the U.S. President wants an accommodation little successful the world's apical reserve currency, a woody dubbed the Mar-a-Lago accord.