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BoJ and GPIF implications on Asian currencies – ANZ

FXStreet (Barcelona) - Research Analysts at ANZ view three key channels through which the additional BoJ easing and shift in GPIF asset allocation could impact Asian currencies: trade, portfolio and FDI flows.

Key Quotes

“In our assessment, the negative impact via the trade channel will dominate, offsetting the benefits from increased portfolio flows into the region. FDI decisions tend to be dominated by longer term considerations. Prolonged JPY weakness could encourage Japanese investments onshore as opposed to outbound investment.”

“Our analysis suggests that KRW and TWD will be the two currencies most negatively impacted given their high export similarity with Japan. In comparison, the INR and IDR are most immune to JPY depreciation.”

“Given that TWD seems to be lagging the moves in JPY and KRW at present, and we are constructive on the Indian economic outlook, we recommend selling 3m TWD/INR NDF at 2.04 (spot reference 2.01), targeting 1.95 with stop-loss at 2.09. “

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