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SGD & CNH Have Highest Correlations With Yen, INR The Lowest

ASIA FX

With tomorrow's BoJ meeting coming into focus, below we look at the correlation between USD/JPY moves and major USD/Asia pairs. The table below reflects correlations since the start of the year based off daily percent changes between USD/JPY and the relevant USD/Asia pair.

  • USD/SGD sits the highest, just under 70%, this is followed by USD/CNH at 56%. For SGD FX, largely being a deliverable currency (outside of hitting the MAS policy bands), leaves it reasonably strongly correlated with the yen.
  • For USD/CNH there are trade linkages between the two economies. We have also seen both currencies used as funding vehicles for long carry trades. This helped explain USD/CNH's sharp retracement last week, as USD/JPY also dipped sharply.
  • Other correlations are mostly lower and between the 15-30% region. KRW's correlation is not that high, despite the other trade competitiveness linkages.
  • INR's is the lowest at close to flat. There are clearly less economic links between Japan and India, but the rupee also remains heavily managed by the Indian authorities.
  • These correlations are worth being mindful of given tomorrow's BoJ outcome could induce yen volatility.

Fig 1: USD/Asia Correlations With USD/JPY - 2024 To Date

Source: MNI - Market News/Bloomberg

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