In the wake of Donald Trump's election victory, the global currency markets have been in a state of flux, with the Japanese yen and other Asian currencies showing significant weakness against a resurgent US dollar. Roula Khalaf, the Editor of the Financial Times, has selected a series of insightful stories that shed light on these developments and their potential implications for the global economy.

Weathering the Storm: Strategies for Navigating Currency Volatility

Yen Weakens as Investors Bet on Slower Rate Hikes in Japan

The Japanese yen has fallen past the ¥154 mark against the US dollar, reaching its weakest level since late July. This decline has been driven by investors' expectations of slower interest rate hikes in Japan, in contrast with the Federal Reserve's ongoing tightening cycle. Atsushi Mimura, Japan's top currency diplomat, has warned that the authorities are closely monitoring the situation and are "ready to take appropriate actions against excess moves" in the yen. This strong statement underscores the government's determination to intervene and stabilize the currency if necessary.

China Sets Official Exchange Rate at Lowest Level Since November 2021

The Chinese renminbi has also faced significant depreciation pressure, with the People's Bank of China setting the official exchange rate at 7.166 to the US dollar, the lowest level since last November. This move comes after the renminbi tumbled 1% against the dollar on Wednesday. Analysts believe that the Chinese authorities will likely confront further depreciation pressure if President Trump follows through on his pledge to impose steep tariffs on all Chinese imports.

Emerging Asian Currencies Under Pressure as US Dollar Surges

The currency turmoil has not been limited to Japan and China, as other Asian economies have also seen their currencies weaken against the US dollar. South Korea's won touched an intraday low of below Won1,400 to the dollar, its lowest level in two years. Vietnam also set its reference rate for the dong at a record low, while Indonesia's central bank has stated that it is prepared to stabilize the rupiah.

Investors Positioning for China's Economic Stimulus Announcement

Amid the currency volatility, investors are closely watching for the next stage of China's economic stimulus measures, which are expected to be announced by the National People's Congress, the country's rubber-stamp parliament, on Friday. Analysts believe that the Chinese authorities will likely continue with stimulative policies to offset the potential impact of a more protectionist trade stance from the Trump administration.

Navigating the Uncertainty: Strategies for Investors

The currency market turmoil has significant implications for investors, with Société Générale analysts warning of "Asia FX downward pressure, higher US treasury yields, and tariffs." Johanna Kyrklund, the group chief investment officer at asset manager Schroders, has advised that a "protective trade stance is supportive of the US dollar and poses a risk to growth outside of the US." As such, investors will need to carefully monitor the evolving currency landscape and adjust their strategies accordingly to navigate the uncertainty.