Asian FX, stocks upbeat in new year on vaccine-led recovery hopes

Currencies of emerging Asian markets began the new year on a firm note, while most stock markets also rose on Monday as investors put their faith in coronavirus vaccines to spur economic recovery.

A flurry of robust manufacturing data across the region that pointed to a stabilisation in economic activity also fuelled risk sentiment, helping the MSCI's broadest index of Asia-Pacific shares outside Japan hit an all-time peak.

The greenback fell during the Asian trading session, buoying the Taiwanese dollar 1.5%, while the Malaysian ringgit and the South Korean won advanced 0.6% and 0.3%, respectively.

Regional markets also took heart from the Chinese yuan surging 1% to smash past the key 6.5 per dollar mark, with the currency's gains expected to accelerate further.

"The weaker US dollar is set to be a prolonged theme in 2021," said Han Tan, market analyst at FXTM, adding that emerging-market currencies would stay supported in that case, with optimism over vaccine rollouts adding to gains.

Meanwhile, the rupiah firmed 1.3% to a more than six-month high, where as Indonesian 10-year benchmark yields were down about 17.30 basis points at 5.925%. Yields fall when prices rise.

After concerns over the central bank's autonomy in Jakarta, positive vaccine developments toward the end of 2020 helped the rupiah recoup most of its losses as investors were lured by Indonesia's high-yielding debt amid a weak dollar.

"The rupiah may continue its out performance the global hunt for yields should drive more inflows into its bond markets which would be a major supportive element for the Indonesian currency," Tan added.

A broadly optimistic tone and a subdued dollar also lifted regional equities, with South Korea's KOSPI touching a record high, meanwhile Indonesia, Philippines and Taiwan shares all firmed around 1%.

However, the heavyweight glove makers that had benefited during the early months of the pandemic dragged the Malaysian bourse and Thai shares slipped 0.4% as the government mulled more restrictions amid a record rise in coronavirus infections.