Yahoo Finance Emerging Asian Currencies Finish Year on Strong Note as Vaccine-Hope Raises Outlook for Global Economy
The weaker U.S. Dollar not only drove the major currencies higher in 2020, but it also had an impressive impact on the emerging Asian currencies. They finished the pandemic-hit year on a mostly positive note, first underpinned by favorable U.S. fiscal and monetary policies then driven higher as broader sentiment was lifted by hopes of a vaccine-led economic recovery. A surge in China’s Yuan also gave regional currencies a boost.
Emerging Currencies in Asia Broadly Firmer
Emerging currencies in the region were broadly firmer after the U.S. Dollar weakened as investors continued to bet that COVID-19 vaccine rollouts will help the global economy toward a more sustainable recovery.
“A smooth vaccine rollout can be a game-changer,” said Christopher Wong, a senior foreign exchange strategist at Maybank.
“Global economy could be closer to a more sustainable recovery trajectory amid unprecedented fiscal and monetary support.”
China’s outperformance also helped regional units, with the Taiwanese Dollar firming about 7% in 2021. Investors have lauded the island’s handling of the pandemic, while a global shift to working remotely boosted demand for its tech products.
Emerging Asia’s currencies stand to benefit from a recovery in economic growth in 2021, with the trade-linked Taiwan Dollar, Singapore Dollar, South Korean Won and Chinese Yuan appearing as winners, whereas low interest-rate and inflation environment should support the region’s carry trade favorites.
The Rapidly Rising Yuan
Setting in motion much of the movement in the region was the extremely strong Chinese Yuan. The Yuan has risen rapidly since May, while posting its first annual gain in three as a weaker U.S. Dollar, the widening yield gap between China and the United States and Beijing’s effective coronavirus containment underpinned gains in the currency.
China’s onshore spot Yuan finished its domestic trading session at 6.5398 per dollar on December 31, strengthening 6.5% against the greenback this year.
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This article was originally posted on FX Empire
