Forex Flash: Yen-weakening remains a priority – BTMU

FXstreet.com (Barcelona) - The South Korean won has outperformed since the end of Q2 rising by around 9.5% against the Japanese yen. The pace of recent won gains prompted South Korea's Deputy finance Minister Choi Jong Ku to label movements "excessive" overnight stating that it is time to take action against the won's volatility.

Choi Jong Ku also indicated that various measures to are being studied to dampen won volatility including policy steps on foreign exchange forward positions which may occur as early as next week. According to the BTMU Research Team, "It is further evidence that given current weak global growth conditions most countries would prefer a weaker currency to enhance external competitiveness." Weakening the yen appears to be one of the main priorities for the LDP party with Leader Abe having already achieved some success by managing investor expectations through rhetoric with the nominal trade-weighted yen having fallen by around 3.0% over the last couple of weeks.

However, it still remains 45.0% stronger than its pre-financial crisis low from July 2007 highlighting that the yen's recent decline remains relatively modest. Recent yen weakness has prompted a pick up in net yen buying according to our in house flows with the balance of flows in favor of yen buying for the last five trading days.