Yen weakness

The Japanese currency has weakened yet again after Bank of Japan Governor Kuroda said “monetary tightening is not at all a suitable measure” citing recession odds and higher commodity prices. As the ECB and RBA look to catch up to the Fed in terms of taming inflation, the BOJ cannot.  

Take a look at the Chinese offshore yuan versus the Japanese yen. Both are major Asian exporters as well as net importers of oil, getting hit hard by higher commodity prices and competing to get their goods to the rest of the world.

When the offshore yuan last hit the 20 level against the Japanese yen in April, China devalued its currency further against the dollar. The logic there is if the yuan is cheaper, then their exports will be more attractive and therefore attract more business.

So keep an eye on the Japanese yen against other pairs, and not just the U.S. dollar. There are ripple effects, especially as consumers try to get their hands on commodities and exports.