Source: Wall Street News
The disorderly decline in the yen is still likely to have a gravitational effect on Asian currencies.
The weak yen raised concerns about the “Asian currency war”. As the yen continued to bottom out and set a new low, some investors began to worry about a new round of “competitive depreciation” in the Asian region.
Against the backdrop of the sharp depreciation of the yen, the Japanese authorities “crashed” once and only slowly took action when the yen fell below the 160 mark. According to media reports on Thursday, the market is worried that Japan's intervention may only be a temporary measure. If Japan goes it alone, its effectiveness will only last for a while, which further intensifies expectations of yen depreciation.
Some analysts believe that the disorderly decline in the yen may be the trigger, forcing neighboring countries to take extreme actions, even though their efforts so far have supported the national currency rather than allow depreciation, and the decline in the yen is the worst in the region, weakening the export competitiveness of Japan's immediate neighbors.
Although this view is only a niche opinion and is not enough to repeat the Asian financial crisis, against the backdrop of the continued strengthening of the US dollar, this expectation is receiving some attention.
Henry Quek, head of global markets at Bank of America Merrill Lynch Asia Pacific, said:
We haven't heard the term “competitive devaluation” (competitive devaluation) in a long time, but if the yen depreciates further sharply, there are a series of possibilities for competitive depreciation.
The gravitational effect of the yen
Central banks in Asia have been actively supporting domestic currency exchange rates, and the decline in the yen was the worst in the region, weakening the export competitiveness of Japan's immediate neighbors. The large interest rate gap between Japan and the rest of the world, and investors' preferences for US assets also affect the strength or weakness of other countries' currencies.
In late April, the exchange rate of the yen against the Korean won was also close to its lowest level since 2008. When asked about competitive depreciation, Kisoo Park, senior portfolio manager at Yantong Investments, said:
This is happening, whether intentional or unintentional in devaluation, it's happening and is affecting the rest of Asia.
Although the yen's influence is not as strong as it was in the past, market observers say that the disorderly decline in the yen may still have a gravitational effect on the region's currencies.
Arjun Vij, portfolio manager at J.P. Morgan Asset Management:
The most direct impact is that a sharp depreciation of the yen will drag Asian currencies such as the Korean won down.