Asia emerges as an economic zone
Asian currencies are increasingly correlated with the Japanese yen, as regional banks try to keep currencies aligned with one another
Asian currencies (Korea, Malaysia, Philippines, India, Indonesia, Taiwan and China) are now trading in lockstep with the Japanese yen. In large part this is managed: so many Asian countries compete in the same export markets that their central banks try to keep their currencies aligned with each other.
The chart shows the average correlation of the major Asian currencies against the Japanese yen, the most important Asian currency. That is the average of the correlation of each currency against the yen.
The odd man out is China’s RMB, which trades in its own universe. The other Asian currencies are more correlated than ever with the yen. That shouldn’t be surprising given the explosion of Asian trade during the past few months. Japan’s exports to Asia for example are up 16% year on year, while exports to the US are up just over 3%.