The dollar has taken a breather, slipping slightly against the yen. I predicted in this column a month ago that the dollar would hit 130 yen in a month or two. My prediction has turned out to be wide of the mark. Having hit 126 yen early this month, the dollar is now hovering around 123 yen.
The yen's steep fall against the dollar in recent months set off a fierce outcry from Japan's Asian neighbors. In only six months, Southeast Asian currencies have risen 10 percent to 15 percent against the yen, undermining the competitive position of exporters in the region. The yen's weakness has hit manufacturers in South Korea, Taiwan, Hong Kong, Singapore and other newly industrializing economies that compete directly with Japanese firms on export markets.
While the currencies of Hong Kong, China and Malaysia are linked to the dollar, Singaporean and Thai exporters, for example, have benefited from the recent falls of their currencies. The Thai baht has plunged 4 percent against the dollar in the past six months and the Singaporean dollar has declined 3 percent. This, however, made imports costlier in dollar terms, inhibiting monetary authorities from easing their grip on credit for fear of inflation.