The yen’s surge amid a rout across Asia was aided by the 30 percent tumble it had taken since 2012 that had made it too weak to decline much further after China devalued its own currency, according to Royal Bank of Scotland Group Plc.
Japan’s currency climbed to a six-week high of 120.73 per dollar Monday as a rout in commodities and equities fueled demand for safer investments. The yen is the only currency in Asia that has strengthened after China unexpectedly drove down the yuan on Aug. 11. Malaysia’s ringgit and Indonesia’s rupiah tumbled to the weakest levels against the dollar since the Asian financial crisis of 1998, while other regional currencies from the Thai baht to South Korea’s won slid to multi-year lows.
The yen has slumped more than 30 percent against the greenback since Prime Minister Shinzo Abe came to power with plans to kickstart the economy through quantitative easing. BOJ Governor Haruhiko Kuroda last month ruled out any immediate expansion in the central bank’s monetary stimulus as he expressed confidence that inflation will reach its target by September 2016.
“Though Japan’s economy is highly exposed to China, the already very weak levels of the yen -- it is down more than 30 percent in real, trade-weighted terms since 2010 -- is allowing the currency to strengthen while other regional currencies like the Korean won fall on the back of the weaker yuan outlook,” Mansoor Mohi-uddin, senior markets strategist in Asia at Royal Bank of Scotland Group, said in an interview.
Since the end of 2010, the yuan has strengthened against the dollar, while the currencies of South Korea, Philippines, Singapore, Taiwan and Thailand, Malaysia and India have weakened less than the yen.