The yen rose by its most in nearly two weeks after US Treasury Secretary Scott Bessent said he expected Japan to raise interest rates to curb inflation. Asian stocks paused after three consecutive days of gains.
The yen rose as much as 0.7% against the dollar after Besant said the Bank of Japan was lagging behind expectations in dealing with inflation and predicted that the central bank would raise interest rates. The dollar index fell for a third consecutive day after Besant urged the Federal Reserve to ease policy. Other Asian currencies, including the Indonesian rupiah and the Malaysian ringgit, also strengthened.
The strengthening of the Japanese yen led to a 1.3% drop in the Nikkei 225 index, dragging down regional stock market indices. Technology stocks fell, while Chinese stock indices rose. Bitcoin hit a new high and the price of gold increased.
“Belshent’s words carry weight in the market, and now he wants the yen to strengthen,” said Rodrigo Catril, a strategist at National Australia Bank in Sydney. “At least in recent days, the market seems to be paying more attention to Belshent’s remarks, with the underlying motive being to depress the dollar.”
Bessenet’s remarks about the Bank of Japan were a rare warning against the policy decisions of a foreign central bank. In an interview with Bloomberg Surveillance on Wednesday, he also exerted external pressure on the Federal Reserve, making the clearest demand yet for US policymakers to carry out a round of interest rate cuts.
Bessenet once suggested that the Fed’s benchmark interest rate should be at least 1.5 percentage points lower than it is now. He said that if officials had known the revised labor market data released a few days after the last meeting, they might have cut interest rates.
He said, “We may take a series of interest rate cuts, starting with 50 basis points in September.”
Last month, the Federal Open Market Committee, led by Chair Jerome Powell, kept the benchmark interest rate within the target range of 4.25% to 4.5%.
Jane Foley, a strategist at Rabobank in London, wrote in a report: “Next year, the Federal Open Market Committee may adopt a more dovish tone, especially if Powell opts to step down as chair at the end of his term.”
Regarding Japan, Besant said that the Bank of Japan will raise interest rates because the country needs to “control the inflation problem”.
The latest survey by Bloomberg of economists who follow the Bank of Japan shows that about 42% of respondents expect the central bank to raise interest rates in October, while a third expect a rate hike in January. The Bank of Japan is expected to keep interest rates unchanged when it sets policy next on September 19.
Technical analysis:
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Gold: Yesterday, the blue momentum breakthrough followed by a pullback buy strategy provided by our plugin was successfully executed three times in a row, with the highest rebound reaching above 3370. The price may still pull back to test this area within the day, but we will maintain the attempt to buy after the liquidity sweep, or wait for the emergence of a new demand zone. For detailed positions, please consult the plugin.
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Nasdaq: We clearly pointed out in yesterday’s article that it would be best to wait for the price to retrace to around 23,700 before making a judgment. The plugin also provided a “STAND BY” reminder to wait and see. For today, we suggest continuing to wait for the price to retrace for confirmation. For detailed positions, please consult the plugin.
(NASDAQ 15-minute chart)
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Crude oil: The signal for a momentum break has not emerged, so it is not advisable to attempt to follow the upward trend in prices. Keep an eye on the price’s pullback to the 62.50 area for support within the day. For detailed positions, please consult the plugin.
(Crude Oil 15-Minute Chart)
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Key economic data and events to focus on today:
20:30 U.S. Seasonally Adjusted Initial Jobless Claims (in thousands) (to 0809)
20:30 U.S. Producer Price Index for July (year-on-year)
