Odd Lots · Thursday, August 6, 2026
Brad Setser discusses the surprising weakness in East Asian currencies despite significant current account surpluses, driven by strong exports, particularly in the tech sector. He highlights Taiwan's managed currency depreciation and Korea's unique situation where positive equity news leads to currency outflows.
“Well, look, you're right, the global trade surplus is now all in East Asia. The chip electron you know, basically San Francisco decided to spend a lot of money on kit that basically comes from you know, in the first instance, Japan, Korea, and Taiwan, but feeds into a lot of parts from Japan. It's pushing you know, it's help in China too. So you know, we have like really record trade surpluses throughout Asia East Asia except for Japan. We'll get to Japan later.”
“Korea has been strange. It's been this story where the better the news is for Korea, the more the Korean stock market goes up, the more foreign holders of Korean stocks have to sell because they're hitting concentration limits. And that has created a weird situation where good news for the equities for Korea's equity, so you know, Heinez and Samsung was leading to an outward flow and producing record weakness in the Korean wand that is layered on to outflows from the pension system.”