By Anjani Trivedi
Nov. 19, 2014 12:18 p.m. ET
Investors are shedding holdings of Korean won, Singapore dollars and other Asian currencies, in a bet the yen’s fall against the dollar will reverberate through the region’s foreign-exchange markets.
The yen has dropped 4.8% against the dollar since the Bank of Japan surprised markets by introducing new monetary-stimulus measures on Oct. 31.
Investors are wagering that central banks from South Korea to Thailand will allow their currencies to weaken to stay competitive.
Companies and government officials across Asia fear a weak yen will allow Japanese exporters to grab market share. The yen’s decline could also push Japanese companies to invest at home instead of overseas, where their money won’t go as far.
One of the biggest casualties of the yen’s fall has been the South Korean won, which has dropped 3.7% since Oct. 31. Korean companies compete with Japanese firms in the automobile and technology sectors, among other areas, and would be hurt by cheaper exports from rivals.
“The magnitude of the move in the yen is staggering…. We do expect the yen to have an impact on Asian currencies,” said Rajeev Demello, head of Asian fixed income at Schroders Investment Management, which has $447.7 billion of assets under management.
Mr. Demello has reduced his fund’s positions in South Korean bonds and is cautious on Singapore.
Some economists say Asian currencies form a “yen bloc,” in which they rise and fall against the dollar in similar fashion to the yen due to strong trade and investment ties between different countries and Japan. A quarter of Japanese foreign direct investment went into Asia in the first half of this year, totaling $14.8 billion, according to data from the Japan External Trade Organization.