Yen collapse, weakening yuan may add to South-east Asia economic uncertainty

AS the Japanese yen and Chinese yuan weaken against the US dollar, some economists say they may be the catalysts to turn the world's third- and second-largest economies around, but will add to the economic uncertainties for Southeast Asia, including Singapore.

A divergence in monetary policy between the hawkish US Federal Reserve and the dovish Asian central banks has seen the greenback rally on risk aversion. China is easing its monetary policy and Japan is pinning its government bond yields near zero, while the US is poised to further hike rates at the next meeting. 

As a result, the 10-year US Treasury yield has jumped more than 100 basis points to the current level of 2.95 per cent since the start of March, while the 10-year Japan Government Bond yield is capped at 0.25 per cent due to the Bank of Japan’s (BOJ) yield curve control policy, said Peter Chia, Senior FX Strategist at United Overseas Bank (UOB).