Yen’s plunge raises specter of new Asia currency crisis

TOKYO — The Japanese yen’s 12% plunge this year has traders wondering if the Group of Seven might have a currency crisis within their ranks.

The good news: not yet. The bad news, though, is that there are still seven months left in this year of dangerous living for Japan’s currency. Especially when you consider the lack of urgency from Tokyo officials to put a floor under the yen.

This is unnerving Asia and injected a 1997-like vibe into the region’s markets as central banks scramble to stabilize exchange rates. From the Malaysian ringgit falling to 26-year lows to Indonesia’s central bank announcing a surprise rate hike last week, the battle with currency speculators is heating up.

In Manila and Bangkok, central banks are shelving rate-cuts plans. In Seoul, Governor Rhee Chang-yong says the Bank of Korea is ready to “deploy stabilizing measures” amid “excessive” won moves. In Beijing, officials are mulling their options as deflationary forces complicate China’s outlook.

China, of course, is the biggest concern. Will President Xi Jinping’s economy join the yen in a race to the bottom, ensuring a new currency war?

“They probably should — to boost exports, help deflation and help domestic growth,” says Brad Bechtel, global head of foreign exchange at Jefferies Financial Group Inc. “But I don’t think they will.”

Khoon Goh, head of Asia research at ANZ Bank, says “we see the possibility for further near-term weakness towards the key 7.30 level, as the authorities have been gradually allowing the onshore spot to adjust.”

The Chinese yuan is currently trading at 7.24 to the US dollar. Yet 2015-like devaluation seems out of the question as it would squander hard-earned progress in increasing global trust in the yuan. And the