Asian Currencies Benefit as Japanese Yen Continues Its Unexpected Strength

The Japanese Yen has been making headlines in recent weeks due to its unexpected strength. This trend has had significant effects on Asian currencies, particularly the South Korean Won, Thai Baht, Singapore dollar, and Philippines Peso. According to a report from MUFG Research, these currencies are more sensitive to JPY movements than others in the region.

The research found that since 2025, the sensitivity of most Asian currencies to JPY movements has decreased. However, the South Korean Won stands out as an exception, with both its conditional beta measures and correlation to JPY having increased over the last two years.

As a result, if the Japanese Yen continues to strengthen, MUFG Research predicts that the KRW, THB, SGD, and PHP will benefit in the Asia FX context. This is likely due to the robust export momentum in Asia, which is expected to remain at a high level into 2027.

The report also touches on the recent joint FX intervention between the US and Japan, highlighting concerns around possible forced selling of US Treasuries over the medium-term. However, it notes that Japan is unlikely to have to intervene in this way over the near-term, given its existing $160bn short-term deposits.