Asian equities declined as renewed tariff concerns emerged following President Trump's threat of levies on South Korean goods. The yen held its gains, while the Kospi Index fell and the South Korean won weakened. Investors await megacap technology earnings to gauge the sustainability of the AI-driven rally.
Indian benchmark indices Sensex and Nifty have seen a significant decline of over 4% this month, driven by foreign fund outflows, a weakening rupee, and geopolitical risks. Market participants are hoping for a pre-budget recovery, a trend observed historically. Elevated crude oil prices and rising global bond yields are further contributing to investor caution.
Investors are finding success by selling dollars and buying emerging-market currencies. This strategy is off to a strong start in 2026. Experts predict these gains will continue. Carry trades are already showing positive returns. Policies from President Donald Trump are impacting the dollar. Currencies like the South African rand and Colombian peso are at multi-year highs.
The Federal Reserve is expected to pause its interest-rate-cutting cycle this week, as a more stable jobs market eases divisions within the central bank. Officials believe current rates are appropriately positioned to support employment while keeping inflation in check. This decision aims to refocus on the Fed's core mandate, though it may intensify criticism from President Trump.
Emerging Asian markets are attracting new investment as a safe haven amid ongoing geopolitical uncertainties. While tariff threats against Europe have temporarily eased market jitters, persistent tensions in the Middle East and Latin America are driving investors towards regions offering superior risk-adjusted returns and stronger economic fundamentals.
