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Asia FX markets not yet concerned about Fed taper talk

By Aaron Woolner

11:07, 3 June 2021

Stack of rupiah notes

Despite mounting calls for the US Federal reserve to taper its asset purchase programme Asia market economists are not yet concerned there will be a repeat of the 2013 ‘Taper Tantrum’ in the region’s markets. 

In May 2013, the US Fed announced it would taper its massive post-great financial crisis bond-buying programme, triggering outflows from emerging markets globally with India and Indonesia both acutely hit.

The rupee depreciated over 15% against the dollar between 22 May and 30 August, 2013 while the rupiah fell 27% versus the greenback between May and the end of the year - both country’s central banks were forced into rate hikes to defend their currencies. 

No repeat of taper trantrum 

However, National Australian Bank’s director of economics, Tapas Strickland, told Capital.com that despite more voices calling for the Fed to move into taper mode again there has so far been no signs of a repeat of 2013 in Asia.

“The markets right now are not too concerned about the talk of tapering. However, when the senior members of the Fed start talking about it, we may start to see an impact on the markets.”

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Speaking on a webinar on 2 June, Philip Wee, fx strategist  for G3 & Asia at DBS Bank said that better inflation and current numbers in 2021 meant there was unlikely to be a repeat of 2013 for the rupiah. But there is potential for the rupee to be affected by Fed tapering. 

"This time around for Indonesia, we don’t have two indicators of macro instability that we had in 2013 – inflation rate is nowhere near as high as it was in the four quarter of 2013 and current account deficit not as wide. For the INR, we are taking a very cautious view and that India is not out of the woods".

The rupiah has remained range-bound against the dollar, spending May hovering around 14,300, while the rupee on 3 June was trading at 72.97 versus the dollars 10:00 BST (UST +1).

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Read more: Indonesia inflation reaches five-month high in May

 

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