Asian Markets Rally as Fed Signals Rate Cuts, Yen Rebounds Sharply

Nikkei, Hang Seng, and KOSPI Post Best Week Since 2023

Asian equity markets surged during the week ending March 20, 2026, after the U.S. Federal Reserve signaled three rate cuts totaling 75 basis points in 2026, beginning in June. Japan's Nikkei 225 rose 6.2% to close at 42,850, the Hang Seng Index gained 5.8%, South Korea's KOSPI advanced 4.9%, and India's Sensex added 3.7% — the strongest weekly performance for all four benchmarks since late 2023.

The Japanese yen strengthened 3.4% against the dollar to 142.5, its sharpest weekly appreciation in two years, as narrowing interest rate differentials between the U.S. and Japan attracted capital flows back to yen-denominated assets.

Market Drivers

Fed Chair Jerome Powell's post-meeting press conference emphasized that U.S. inflation had "sustainably returned to the vicinity of 2%" and that labor market conditions warranted a "recalibration of monetary policy." The dot plot showed a median expectation of 4.0% for the federal funds rate by year-end, down from 5.25%.

The rate signal triggered a broad risk-on environment across emerging and developed Asian markets. Foreign investors bought a net $8.2 billion in Asian equities during the week, with Taiwan ($2.8 billion), South Korea ($2.1 billion), and India ($1.9 billion) receiving the largest inflows, according to data compiled by the Institute of International Finance.

Currency and Bond Markets

The yen's rebound provided relief to the Bank of Japan, which had intervened in currency markets three times since January to slow yen depreciation. BOJ Governor Kazuo Ueda said the yen's movement "reflects a correction of excessive weakness driven by interest rate differentials" and signaled that the BOJ would maintain its gradual tightening path with the policy rate at 0.5%.

Asian sovereign bonds rallied, with 10-year yields falling 15-25 basis points across most markets. Indonesia's 10-year yield dropped to 6.15%, the lowest since March 2024, as foreign investors returned to the bond market after months of outflows.

Sector Highlights

Technology stocks led the rally, with Taiwan Semiconductor Manufacturing Company rising 8.3% and Samsung Electronics gaining 6.7%. The semiconductor sector benefited from both the rate signal and reports of stronger-than-expected AI chip demand from hyperscale data center operators.

Real estate investment trusts in Singapore and Hong Kong posted their best week in three years as lower rates reduce financing costs and improve property valuations. CapitaLand Investment gained 7.1% in Singapore, while Link REIT rose 6.5% in Hong Kong.