Yen rebounds as Citi, Barclays name 3 Asian currencies to benefit, Taiwan dollar also in focus

The Japanese yen has staged a remarkable comeback in the past week, largely attributed to coordinated intervention in the foreign exchange market by Japanese and U.S. authorities. This move aimed to support the yen, which had been hovering near its lowest levels since the 1980s.

Financial institutions like Citigroup and Barclays are now forecasting a ripple effect across Asian markets. Their analysts note a strong correlation between the yen and many other Asian currencies. As the yen strengthens, they expect a corresponding appreciation in currencies such as the South Korean won, Singapore dollar, and Thai baht. Citigroup specifically highlighted that the South Korean won, Singapore dollar, and Taiwan dollar have shown the highest correlation with the yen over the last year.

In the three trading days leading up to Monday, the yen surged over 4% against the U.S. dollar. During the same period, the South Korean won, Thai baht, and Philippine peso each gained at least 0.7%. The Bloomberg Asia Dollar Index, which tracks a basket of Asian currencies excluding the yen, also saw a 0.5% increase.

Barclays Bank further elaborated that the South Korean won is the most sensitive Asian currency to the yen's fluctuations. The recent appreciation of the yen is expected to reinforce the won's existing upward trend, signaling a potentially positive period for these regional currencies.

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Just as the yen's weakening often leads to a weakening of Asian currencies, we believe the opposite should also hold true, that the yen's appreciation should also have an impact on the strengthening of Asian currencies.