If you look at the past year, you can see the market has been sorted into haves and have-nots. The Rupee is one of the laggards, down 6 to 7 per cent on the greenback, whereas the New Taiwan Dollar is leading the way with a 10 to 13 per cent jump. That kind of spread is no small thing when it comes to the way business and money are done in the region.
It is not as simple as a North-South tale, but there is a pecking order. You have the tech-driven economies of the north leaving others in the dust: the Korean Won is up 8 to 12 per cent and the Yen 6 to 9 per cent. Over in Southeast Asia, it is a mixed bag; the Indonesian Rupiah has given back 3 to 5 per cent and the Philippine Peso 1 to 3 per cent.
Asia’s currency divide widens
The strong hand of the US dollar over the last year made for an uneven playing field. With rates up and a steady appetite for dollar assets, the markets that could draw in the world’s capital were handsomely treated, while those with pricier imports or outflows were put in their place. The numbers show some, like the Chinese Yuan (1-3%) and the Singapore Dollar (2-4%), managed to put in a few points.
Though even among the ones in the black, there is a difference in scale. The Thai Baht (4-6%) and the Malaysian Ringgit (5-8%) have been more of a force than the rest. India is an outlier here. It is not for want of an economic story, but the currency has been driven by other forces.
India’s rupee slips despite growth narrative
A 6 to 7 per cent fall in the rupee is a case of sustained pressure. For anyone looking to put money in Asia, it is a reminder that a solid macro picture does not necessarily mean your currency will be, particularly when the dollar is in a dominant phase.
What held the rupee back
You can put a finger on a number of headwinds from the last twelve months that have kept the rupee in check:
– A firm US dollar thanks to higher rates
– The cost of bringing in crude and electronics
– Some foreign portfolio exodus
– A move to safety in times of risk
– The RBI being more concerned with curbing volatility than the rate itself
Taiwan rides the chip cycle
When you see the New Taiwan Dollar up 10 to 13 per cent, it is not for no reason.
You could put it down to a bit of a tech upcycle, but in truth it was the kind of innovation that put the island on the map for global supply chains. The world’s appetite for AI, top-tier chips and high-performance computing has been a direct boon to export revenue and home-grown assets.
No surprise then that it has lured in a lot of foreign money for Taiwan’s tech industry. You get strong exports, you back up the currency, and you have a self-sustaining cycle. Other Asian markets have had their moments, but being at the centre of the semiconductor game has given Taiwan an edge that puts some distance between it and those without the same kind of tailwind.
Why this is relevant for India
When the rupee softens, it reorders the pecking order in India Inc. Exporters find they can be more competitive on price, and if you’re making dollars, your numbers look better. On the flip side, importers are squeezed and the cost of a trip or a degree abroad goes up. Where you land in the end comes down to oil, how much risk is in the market, and where the foreign capital is heading.
On the plus side for India:
– Your wares are easier to sell overseas
– IT and other multinationals with dollar income do well
– Earnings from outside the country add to the bottom line
Then there are the headwinds for the average household and importers:
– Electronics and other imports run you more
– Inflation is a concern when crude is up
– Going or studying abroad isn’t as cheap
It’s made for some interesting conversations among portfolio managers. With the Won up 8 to 12 per cent and Taiwan’s export machine in overdrive, eyes have been on the chip trade. India’s equities have the backing of local growth, sure, but the currency hasn’t done any favours for USD returns of late.
What’s on the horizon
Currencies don’t move in a straight line. It’s all about rate differentials, the state of trade, and what’s happening with cross-border money. The RBI is in no mood to pin the rupee to a number; they’ll let it be and work to keep the jitters to a minimum.
If you look at the data from this year, you see two things. One, India has the makings of a good story with its digital push and infra build-out. Two, Taiwan has shown you what happens when you lead in semiconductors – the currency moves with it.
We’ll see if this holds. A lot will be made of central bank moves, energy costs and where the smart money is going in the next 12 months. As long as the need for tech is there, Taiwan will be fine. If oil cools off and the inflows come back to India, the rupee might have some room to breathe.
The numbers don’t lie: the Rupee is in the red by 6 to 7 per cent for the year, while the New Taiwan Dollar is 10 to 13 per cent in the black. And in between, you have the rest of Asia, with each one having its own take on where the next wave of capital is headed.
