Forex Flash: Deciphering the yen is not straightforward – ANZ

It has been very fashionable to pin the blame for the late January rally in USD/Asia on yen weakness. While there is no doubt that a weak yen will have an impact on relative competitiveness in the Asian region, the impact on the region’s currencies is not that straightforward.

For a start, yen weakness started to emerge from mid-November last year. The weakness accelerated over December and January as it became clear that policymakers were going to pursue more aggressive stimulus in an attempt to reflate the Japanese economy. According to Senior FX Strategist Khoon Goh at ANZ, “If Asian currencies were indeed heavily influenced by yen movements, then we would have expected to see signs of this late last year. That is, as USD/JPY rallied, USD/Asia should have moved in tandem.”