Today, the market lacks prominent catalysts. The economic calendar includes Canadian employment statistics for August and Canada’s capacity utilization rate for the second quarter of 2023. The only U.S. data of note is the wholesale inventories for July, which being a final figure, is expected to attract little market attention.
Regarding speeches and events, the Vice Chair of the Federal Reserve, Brainard, is scheduled to participate in a fintech-related event. However, direct references to monetary policy or economic outlook are not anticipated.
During this week, the USD has been appreciating, and its sustainability will be tested as we head into the next week. Typically, weekends with fewer market drivers can lead to adjustment pressures. It will be interesting to see to what extent adjustment pressures materialize and how they may shape next week’s market dynamics.
USD/JPY experienced a sudden drop in the late morning Tokyo session, briefly touching around 146.60 from the mid-147 yen level. This was attributed to Finance Minister Suzuki’s remarks regarding yen-weakening interventions and escalating U.S.-China tensions related to semiconductors. However, according to market sources, after breaching the 147 yen level, stop orders were triggered, leading to the sharp decline. Although rumors of intervention circulated briefly, the market quickly returned to the 147 yen level, indicating that these were unsubstantiated.
Nevertheless, the recent trend shows the USD being sold against major currencies like the AUD, EUR, and GBP, and even USD/JPY is struggling to break through the mid-147 yen level. This suggests that overseas investors are looking to enter the market for USD adjustment.
Finance Minister Shunichi Suzuki mentioned the yen’s depreciation and the dollar’s appreciation in the foreign exchange market during a press conference after the Cabinet meeting on the 8th. He stated, “We want to take appropriate measures without ruling out any options while watching with a high degree of tension and paying attention to excessive fluctuations.” This statement led to a sharp drop in USD/JPY.
Personally, I was hoping for a bit more depreciation in USD/JPY, but it quickly rebounded, highlighting the strong pressure for yen depreciation. Given the rapid buyback, I have set a settlement limit for the USD/JPY short position at 146.82.
