The hottest keyword in the recent foreign exchange market is undoubtedly the US dollar’s 13-month high. As “the US Dollar Index breaking above 101” becomes a frequent news headline, the two questions investors in Taiwan and Malaysia most often ask are: is it still not too late to exchange currency now, and how should they respond to the impact of a strong US dollar on the TWD, Japanese yen, and US stock investments? This article breaks down the core logic driving the US dollar’s strength and outlines more practical response strategies for different assets and currency positions, helping investors avoid chasing highs out of emotion.
When the US dollar reaches a 13-month high, it is usually not driven by a single event alone. What truly pushes the market higher is the simultaneous pressure from three forces moving in the same direction: “interest rate differentials, growth, and safe-haven demand”. This is what drives the US dollar above market consensus. When the US Dollar Index is seen repeatedly testing key round-number levels recently (such as 101), it is mostly because capital is repricing the path that “US interest rates will stay higher for longer”.
What the foreign exchange market values most is not a single statement, but “how long interest rates will stay elevated”. As long as the market believes the US Federal Reserve (Fed) remains hawkish and is not in a hurry to cut rates in the short term, the interest rate differential appeal of US dollar assets will remain. Taking publicly available information from June 2026 as an example, the Federal Reserve kept the target range for the policy rate unchanged in its FOMC statement, with its tone still focused mainly on inflation and employment as key factors to monitor. As a result, the market became more inclined to extend its pricing of “higher interest rates for longer”. Once this expectation forms, the US dollar will not only rise, but also “become difficult to push lower”.
To get to the root of it, it is best to read the official original text directly: Federal Reserve Issues FOMC Statement. The value of this type of official document lies in its ability to distinguish whether the market is merely speculating or actually reflecting the policy context.
Keyword variation reminder: In the news, this is also often written as “the US dollar hits a more than one-year high”, “the US dollar strengthens”, or “the US Dollar Index rises”. In essence, all of them point to the same thing: US dollar interest rate differentials and capital inflows.
When US economic data remains resilient (especially nonfarm payrolls and core inflation), it becomes difficult for the market to bet on rapid rate cuts. For the US dollar, this amounts to a double boost: “rates are not coming down, and the economy is not collapsing”. This is also why, at certain stages, you may see US stocks avoiding a sharp decline while the US dollar remains persistently strong, because capital views the US as a relatively safe parking place with better returns.
For readers in Taiwan and Malaysia, a more intuitive interpretation is this: as long as US data does not weaken, the US dollar’s 13-month high is not a one-off vertical spike, but more like a range-bound market that keeps moving upward step by step.
Once tensions in the Middle East and other geopolitical conflicts escalate, market risk appetite can decline rapidly. At such times, the US dollar often benefits from safe-haven demand, especially in an environment where US interest rates remain high, giving the dollar both “safe-haven” and “interest rate differential” appeal. This is also the most uncomfortable part of a strong US dollar: it does not need a large number of bullish factors to rise, only enough bad news and insufficiently attractive alternatives.
When the US dollar reaches a 13-month high, non-USD currencies often come under pressure at the same time. This is not because any one currency is “particularly weak”, but because the US dollar has become “particularly strong” at the same time. For asset allocation, the focus is not on predicting every price level, but on understanding which positions will have their volatility amplified by exchange rates.
Japanese yen: A common market scenario is the widening of the “US-Japan interest rate differential”, which makes capital more inclined to hold US dollar assets, leaving the yen more likely to weaken. If the pace of Japan’s policy normalization is slower than market expectations, the yen’s rebound will be more fragile.
New Taiwan dollar: In addition to being affected by interest rate differentials, the New Taiwan dollar is also driven by exports, capital market flows, and foreign investors’ net buying or selling. When the US dollar strengthens, the New Taiwan dollar tends to show a “depreciating but paced” trend; if Taiwan stocks also become volatile at the same time, exchange rate swings will become more pronounced.
Renminbi: More often, it reflects domestic demand, policy expectations, and cross-border capital flows. When the US dollar remains strong and global capital turns more conservative, the renminbi also tends to come under pressure.
Keyword variant reminder: You will also see phrases such as “non-USD currencies weakening”, “Asian currencies under pressure”, and “exchange rates testing downside breaks” in reports, but the core scenario is the same.
A strong US dollar is often accompanied by a sense of tighter global liquidity, making capital more likely to flow back into US dollar assets, while emerging markets may face capital outflow pressure. For investors, this does not mean clearing out all emerging market positions, but rather paying closer attention to two things:
A strong US dollar is not entirely negative. For some export-oriented companies, converting US dollar revenue back into local currency may bring foreign exchange gains, and financial performance may receive a boost from the “exchange rate dividend”. A common scenario in Taiwan is that if a company mainly receives payments in US dollars while its costs are primarily in New Taiwan dollars, New Taiwan dollar depreciation may be favorable to gross margins in the short term (though hedging policies and pricing models still need to be considered). Malaysia is similar: if companies export US dollar-denominated products or are related to raw materials, the exchange rate environment may provide a temporary boost.
When seeing the US dollar reach a 13-month high, many people’s first reaction is, “Will I be buying at the top if I buy now”. But what truly needs to be avoided is treating currency exchange as a one-time bet. A more mature approach is to treat exchange rates as part of asset allocation: manage them through scaling in, scenarios, and objectives.
If you already hold US dollars, there are two common situations:
A commonly used practical saying is: Do not try to sell at the highest point. Instead, make sure you do not give back all the trend profits already earned. This is risk control.
For investors in Taiwan and Malaysia buying US stocks, the common risk is not choosing the wrong company, but overlooking the impact of exchange rates. When the US dollar is strong, several types of companies require particular attention:
This is also why, under a “stronger US dollar”, US stock allocation requires greater diversification across sectors and cash positions. Keyword variant reminder: if you search for “impact of a strong US dollar on US stocks” or “US dollar appreciation corporate financial statements”, most of the discussion follows the same logic.
Traditionally, a stronger US dollar suppresses gold and some commodity prices denominated in US dollars, but this is not an ironclad rule, because when geopolitical risks rise, gold may also strengthen due to safe-haven demand.
In this scenario, a “13-month high in the US dollar” is more like a reminder: the market is viewing the world with a higher risk discount rate, making asset prices more prone to sharp swings.
A: The market cares more about “how long the US dollar will remain strong”, rather than a precise level. If US interest rates remain elevated and economic data does not weaken significantly, the US dollar will be more likely to stay strong than weaken; however, after reaching high levels, it often also sees rapid pullbacks. In practice, exchanging currency in batches and setting clear purposes for the funds (travel, tuition, investment) are more effective than guessing the peak.
A: Usually, two signals need to appear: first, inflation has declined and the trend is clear; second, employment and consumption have weakened, leading the market to start betting on rate cuts. The FOMC statement, core inflation indicators, and labor market data can be tracked regularly, as these three directly affect interest rate expectations.
A: If the goal is hedging, you do not necessarily need to buy at the lowest point; however, you should avoid going all in at once. A more prudent approach is to buy in batches to smooth out exchange rate volatility, while keeping part of your local currency cash for short-term expenses, so you can avoid being forced to exchange back at an unfavorable rate if a pullback occurs.
A: Not necessarily. In the short term, the index may fluctuate due to foreign capital flows and declining risk appetite, but some export-oriented companies may benefit from foreign exchange gains or pricing structures. The key observation points are industry attributes (export exposure and cost structure) and corporate hedging policies, rather than only looking at whether the index rises or falls.
A: Split the required amount into 3-5 batches for exchange, and set the “latest time by which the exchange must be completed”. Travel or tuition fees are definite expenses, so the focus is on controlling uncertainty: batching reduces the probability of buying at a single high point and is also more aligned with the cash flow rhythm of ordinary households.
A 13-month high in the US dollar is usually the result of policy rate differentials, economic resilience, and safe-haven sentiment resonating together. In the short term, the strong US dollar structure is indeed not easy to break, but the more this is the case, the more important it is to avoid emotionally chasing higher. A more practical approach is to treat currency exchange and holding foreign currency as part of asset allocation: exchange in batches, consider the purpose of the funds, maintain cash flexibility, and continue tracking Federal Reserve policy signals, inflation, and employment data. If these points can be achieved, even major foreign exchange volatility will not be enough to disrupt your investment rhythm.
