Yen Strength Provides Room for Regional Currencies to Gain
The Japanese Yen (JPY) has been gaining strength in recent times, and its appreciation is providing breathing room for other Asia-Pacific currencies. The USD/JPY daily chart shows a steady upward trend, with the Yen's trade-weighted importance across Asia allowing it to function as a relief valve for neighboring economies.
According to Geoff Yu at BNY, the Yen's recent strength has offset US Dollar legs and lowered effective exchange-rate headwinds. This has provided scope for regional currencies to strengthen, provided current-account support holds and crude oil prices remain contained.
The combination of a stronger JPY and high expectations surrounding the Bank of Japan (BoJ) has created a high bar for further USD/JPY downside. With a September BoJ rate hike fully priced in, policymakers must follow through with concrete rate increases to sustain the Yen's upward momentum.