The intervention by Japan in currency markets to weaken the Yen represents, in my view, a partial ripple effect from the pegging of the Yuan. The cycle of intervention in Asia might continue for awhile. Though it is too early to know, this type of government behavior over the short and medium-term has the potential to significantly disrupt the natural market signals in currency trade.
There are indications that the entire Asian block could move in unison to weaken their collective currencies against the US Dollar in an attempt to create structural trade advantage. I do not believe the chances are high of this occurring, however, the probability is not zero. Over the years the region has discussed working in coordination with a long-term goal of creating an EU type of arrangement.
The developments in world currency markets are worth watching closely. These actions affect every American.
I will be writing more on this issue soon.
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