Vaccination and currency immunity

In the past couple of months governments in Asia-Pacific have materially accelerated the administration of Covid-19 vaccines.

But because of low starting points, vaccination rates remain low compared to the EU, US and UK and even a number EM economies (including Turkey). The exceptions are Korea, Malaysia and Japan which have now administered a similar number of doses per capita as the US, while Singapore has pulled further ahead.

In countries where governments started to vaccinate early such as the US and in particular the UK, vaccine roll-outs have slowed materially in the past nine weeks. These countries are taking additional measures to encourage those not yet vaccinated to do so and there is talk of jabs for under-18s and of booster jabs at least for the most vulnerable.

The picture for the increase in Covid-19 deaths since early July is even more granular.

In countries where governments started vaccinating early and now have high rates of vaccination, including the UK, US and EU, the number of deaths has perhaps unsurprisingly increased only marginally.

The rate of increase and total number of deaths remain negligible in New Zealand despite a sill modest vaccination roll-out. It has to varying degrees been a similar situation in Australia, Korea, Japan, Singapore and Taiwan.

The increase in deaths has also been modest in India and Philippines, albeit from a higher starting point. The increase in deaths has been far higher in Indonesia, Malaysia and in particular Thailand.

Vaccination rates are a critical variable from a health and economic perspective but their direct impact on currencies has been mixed.

New Zealand Dollar has outperformed but is not particularly expensive in our view. Going forward we would expect it to remain well supported even if still vulnerable to pull-backs.

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