The Taiwanese dollar has plummeted amid expectations the United States will designate the nation as a currency manipulator, the Financial Times reported on Tuesday.
US president Joe Biden and his administration is set to include the Asian country on its Treasury Department list of countries accused of debasing national currencies.
The currency fell over 2 percent to 28.5 to the USD, down from 28 due to the threats along with a rise in US Treasury yields, causing investors to avoid growth stocks and triggering a sell-off of shares of semiconductor firms listed in Taipei, FT wrote.
According to FT, analysts have warned the blacklisting and tariffs on Taiwan's exports could sour ties with the key regional ally, namely amid the ongoing global chip shortage and allegations of Chinese incursions into Taiwan's air defence identification zone.
But the developments come after Biden signed an executive order to tackle the ongoing global semiconductor shortage damaging operations and production across multiple sectors, including automotive, medical and consumer electronics.
Taiwan Semiconductor Manufacturing Corporation, the world's largest and most advanced chipmaker which provides components for tech giants such as Apple, Qualcomm, Nvidia, HiSilicon and others, is based in Hsinchu.
“If [the US] want to reduce our trade surplus with them, then we could just stop selling them our chips. But they need them,” Yang told legislators at a hearing in the capital.
The news comes after Washington appointed Brad Setser, economist and Counselor of the Office of the US Trade Representative, in February, who alleged Taipei had used currency hedging mechanisms in recent months.
According to global media, Taiwan's central bank reportedly limited appreciation of the currency from January to February to back its massive export industry. The bank has declined comment on its foreign exchange rate policies, FT added.