This Great Graphic, created on Bloomberg, shows the US dollar against the Japanese yen since the beginning of the financial crisis. The dollar fell almost 40% from the peak in 2007 until the low in 2011.
It has now pulled back, with the help of verbal guidance from Japanese officials, new evidence that deflation has not loosened it's grip and high tensions with its biggest trading partner and regional rival China. In addition, the need for the yen's safe haven status has been reduced by favorable developments in Europe, the US and China.
The dollar has recovered nearly 21% of the lows to return to the congestion area from 2010. The next technical target comes in near JPY94.00. As we noted earlier this week, we remain struck by the silence of Chinese officials in the face of the depreciation of the yen. However, the protest by others is seeming to get louder. South Korea, for example, is believed to have stepped up its intervention to buy dollars and sell won. The shifting competitive landscape has seen the South Korean and Taiwanese equity markets under-perform here in early 2013. Of the main Asian equity markets, foreigners have been net sellers of only Korean shares ($1.1 bln) and Taiwanese shares ($206 mln).