The yen and the yuan are the two most important Asian currencies, and both are right at multiyear lows. But there is one difference from last summer/ fall — the rest of Asia hasn’t faced the same kind of pressure.
This was even more apparent in the data for q2 — Asia ex China/ HK was adding rather substantially to its reserves (rebuilding funds spent in q2 and q3 of last year)
With the rebound in oil that may be changing — the currencies of the rest of Asia came under a bit more pressure in September (while China intervened through the backdoor to hold the CNY steady)
And there are a couple of more general points to be made here — for all the intervention last year (And talk of Chinese intervention now), Asian governments ended up adding to their state assets between q3 2022 and q2 2023 …
And if you include sovereign wealth funds flows (which almost no one does — the IMF and the US Treasury included — because it is hard!) official flows haven’t disappeared from the global economy even as reserve growth stalled.
The final point is a bit more political — currency tensions don’t usually flare up when the dollar is strong, but rather when the dollar starts to weaken and Asian countries resist letting their currencies appreciate .
A host of countries are willing to let their currencies float down but aren’t willing to let their currencies float up (Taiwan, for example, over the last four quarters, has accumulated reserves again … tho mostly via interest income)
Source Credits: Mr. Brad