JPY & PHP - Markets & outlook
Japanese yen - JPY:
The Japanese yen (JPY) is a major global currency and a safe-haven asset, appreciating during global economic uncertainty. Its value is influenced by Japan's monetary policy, economic performance, global risk sentiment, and trade flows.
Unlike commodity currencies like the Australian dollar (AUD) or Canadian dollar (CAD), the yen is shaped by the Bank of Japan (BoJ) and its interest rate policies. Japan's ultra-low or negative interest rates stimulate growth and prevent deflation, making the yen a popular funding currency for carry trades. When markets are stable, demand for the yen weakens as traders seek riskier assets. In economic stress, investors unwind carry trades, strengthening the yen.
Japan's export-driven economy also affects the yen. A weaker yen benefits exports by making goods cheaper globally, while a stronger yen can hurt exports by making products more expensive. The yen's value is tied to trade balances, manufacturing performance, and demand from key partners like the US and China.
The JPY/USD pair is highly liquid, and the US dollar impacts the yen's exchange rate. A stronger USD weakens the yen, while a weaker dollar supports JPY appreciation. Japanese authorities may intervene in forex markets to prevent excessive yen appreciation, as seen in past interventions.
Geopolitical tensions, like the Ukraine war, have impacted the yen's safe-haven role. Uncertainty in Eastern Europe has led investors to shift funds into the yen, supporting its value. Japan's reliance on imported energy makes the yen vulnerable to rising commodity prices and supply chain disruptions.
The yen's future performance depends on BoJ policy, global risk sentiment, trade relations, and geopolitical developments. A shift from low interest rates could strengthen the yen, while continued loose monetary policy may keep it weak against higher-yielding currencies.
Philippine peso - PHP:
The US imposed a 17% reciprocal tariff rate on goods from the Philippines as part of Trump’s growing trade war with countries around the world.
Has USD/PHP peaked?
ABN Amro believe the weaker external balances and an overvalued peso indicate that the Philippine peso is likely to depreciate against the USD in 2025.
What are the implications of the upcoming mid-term elections for markets?
The recent arrest of former president Rodrigo Duterte for alleged crimes against humanity has sparked concerns about its potential impact on the upcoming mid-term elections in the Philippines. While mid-term elections typically do not signify major policy shifts, this development could heighten political uncertainty.
The outlook for emerging Asian currencies is worsening again after US President Donald Trump announced new tariffs on China, curbing optimism that his threats were mainly bargaining ploys.
Unlike some of its Asian peers, the Philippines has not significantly benefited from supply chain diversification and the China+1 strategy, particularly in the electronics sector, where countries like Vietnam, India, and Malaysia have gained global export market share.
