Asian markets risk a reprise of crisis-level stress as two of the region’s most important currencies crumble under the onslaught of relentless dollar strength.
The yuan and yen are both tumbling due to the growing disparity between an uber-hawkish Federal Reserve and dovish policymakers in China and Japan. While other Asian nations are digging deep into foreign-exchange reserves to mitigate the dollar’s damage, the yuan and yen’s slump is making things worse for everyone, threatening the region’s mantle as a preferred destination for risk investors.
"The renminbi and yen are big anchors and their weakness risks destabilizing currencies to trade and investments in Asia,” said Vishnu Varathan, head of economics and strategy at Mizuho Bank Ltd. in Singapore, using another name for China’s currency. "We’re already heading toward global financial crisis levels of stress in some aspects, then the next step would be the Asian financial crisis if losses deepen.”