On a Monday late in August 2021, the currencies and stock markets of Asia's emerging economies found their footing again after a week of anxious selling. The gains were driven by a hint from the American side of the world's money: a Federal Reserve official suggested that the withdrawal of pandemic-era support might wait if the Delta variant weighed on growth. Across Seoul, Taipei, Kuala Lumpur and beyond, traders were quietly weighing these signals against the vaccine rollouts and the political shifts unfolding around them, all while bracing for the central bank decisions that lay just ahead.
Korean Won Leads Asian Currency Gains as Taiwan Stocks Jump 2% on Vaccine Rollout
One Fed official's 'may' lifted a region's currencies
Mark
Why did the won lead the gains today?
Mimi
Two things lined up. Kaplan's comment eased worries about a fast Fed pullback, and the Bank of Korea meets this week after signaling last month that record-low rates are ending.
Luke
Careful, though. The report ties the move to those factors, but it's an interpretation of market behavior, not something any trader confirmed to us.
Mark
What exactly did Kaplan say?
Mimi
That he may need to adjust his view if Delta slows growth materially. He's been among the Fed's strongest voices for reducing support, so the shift in tone mattered.
Luke
And note the word 'may.' He hasn't changed his position, only said it's conditional.
Mark
Taiwan's jump seems different in kind.
Mimi
It is. Stocks rose over 2%, heading for their best day in three months, as the first domestically developed COVID vaccine began rolling out.
Luke
Fair, but the source frames that as signs of progress, not a proven cause. We don't know how much of the 2% was the vaccine versus the broader regional rebound.
Mark
What should I watch next?
Mimi
The Bank of Korea decision, then Powell at Jackson Hole.
Luke
And the Maybank line is one analyst's view that fears may be overdone. It's a forecast, not a fact.
Le Pouls
- The South Korean won climbed as much as 0.6% against the dollar, leading a wave of relief across emerging Asian currencies after a week of nervous selling.
- A Federal Reserve official's suggestion that tapering could be reconsidered if the Delta variant slowed growth unsettled expectations of a rapid retreat from stimulus.
- Taiwanese stocks surged more than 2%, poised for their best session in three months, as the island began delivering its first domestically developed COVID-19 vaccine.
- Malaysia's new prime minister, Ismail Sabri Yaakob, took office after a coalition collapse, and investors hoped his arrival would calm the turbulence in local assets.
- All eyes now turn to the Bank of Korea's rate decision this week and Jerome Powell's Jackson Hole speech, where markets hope for clarity on when tapering begins.
On a Monday late in August 2021, the currencies and stock markets of Asia's emerging economies found their footing again after a week of anxious selling. The gains were driven by a hint from the American side of the world's money: a Federal Reserve official suggested that the withdrawal of pandemic-era support might wait if the Delta variant weighed on growth. Across Seoul, Taipei, Kuala Lumpur and beyond, traders were quietly weighing these signals against the vaccine rollouts and the political shifts unfolding around them, all while bracing for the central bank decisions that lay just ahead.
On Monday, August 23, the South Korean won led a rally across emerging Asian currencies, climbing as much as 0.6% against the dollar. Markets were recovering from a difficult previous week, and traders were positioning themselves ahead of a Bank of Korea meeting later in the week, where the central bank was expected to signal the end of its record-low interest rates.
The mood shifted after comments from Washington. Dallas Fed President Robert Kaplan, one of the strongest voices urging the Federal Reserve to begin pulling back its economic support, said he might have to revise his view if the Delta variant meaningfully slowed growth. Investors read this as a softening at the hawkish edge of the Fed, and some analysts argued that fears of a sharp global slowdown or a rushed Fed retreat might be overblown.
The sharpest gains came in Taiwan, where stocks rose more than 2% as the island began rolling out its first homegrown COVID-19 vaccine. In Seoul, the benchmark index climbed 1.4% after falling in most of the previous dozen sessions. Malaysia, meanwhile, welcomed a new prime minister, Ismail Sabri Yaakob, after the previous government collapsed amid coalition infighting, and analysts expected the volatility of the past week to ease. Thai stocks hit their highest level in over a month on stronger-than-expected July exports, and Philippine equities drew comfort from the central bank's assurance that its low rates would stay put.
The week's next tests are the Bank of Korea's decision and Jerome Powell's speech at Jackson Hole, where investors hope to learn when the Fed's stimulus taper will finally begin.
On Monday, August 23, the South Korean won led emerging Asian currencies higher, climbing as much as 0.6% against the dollar. Traders were positioning ahead of a Bank of Korea meeting later in the week, and the move came as equity markets across the region recovered from the previous week's sell-off.
The lift began with a comment from Washington. Dallas Federal Reserve President Robert Kaplan, one of the U.S. central bank's most forceful advocates for starting to scale back economic support, said on Friday that he might have to adjust his view if the Delta variant slows economic growth materially. Currency markets read that as a softening at the hawkish end of the Fed. Analysts at Maybank wrote that fears of a sharp global growth downgrade, or of faster-than-expected Fed normalisation, may be overdone, and that a Fed decision to defer its tapering announcement could see the dollar ease.
In Seoul, attention centered on the Bank of Korea, whose rate decision comes this week. Last month the bank gave strong indications that its run of pandemic-era record-low interest rates was coming to an end. South Korea's benchmark stock index gained 1.4% on the day, though it had fallen in 10 of the previous 12 sessions.
The sharpest equity move was in Taiwan, where stocks rose more than 2% and were on course for their best day in three months. The island had begun rolling out its first domestically developed COVID-19 vaccine, and investors took it as a sign of progress in vaccinations.
Malaysia was also watching a change of government. Ismail Sabri Yaakob took charge as prime minister on Saturday, after the administration of Muhyiddin Yassin collapsed amid coalition infighting. Malaysian stocks added 0.4% and the ringgit strengthened 0.2%. Mizuho Bank analysts said some of the volatility in Malaysian assets from the previous week's uncertainty would likely abate with a new prime minister in place.
Elsewhere, Thai stocks reached their highest level in more than a month after the country's July exports rose by more than expected on improved global demand. In the Philippines, equities were supported by assurances from the central bank that record-low interest rates would not change anytime soon; the bank said it foresaw no drastic change in monetary policy.
In bond markets, Indonesia's 10-year benchmark yield was up 4.9 basis points at 6.396%, Malaysia's 3-year yield was up 0.5 basis point at 2.342%, and Singapore's 5-year yield was up 1 basis point at 0.808%. By 0356 GMT, regional currencies were mostly firmer: the Indonesian rupiah was up 0.31%, the Philippine peso 0.27%, the Taiwan dollar 0.23%, the Malaysian ringgit 0.19%, and the Singapore dollar 0.16%, while the yen was down 0.05%.
The week's next test is the Bank of Korea's decision, followed by Fed Chair Jerome Powell's speech at Jackson Hole, where investors hope for more clarity on when stimulus tapering will begin.
Citations marquantes
Fears of a sharp global growth de-rating and/or faster than expected Fed normalisation may be overdone.— Maybank analysts
Some of the volatility witnessed in Malaysian assets will likely abate with the appointment of a new PM.— Mizuho Bank analysts
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