MNI US OPEN - Japan Act to Prop Up JPY For First Time in 25 Years

NEWS

JAPAN (MNI): Japan confirms FX intervention, buys JPY for first time in 25 years

JPY surged sharply Thursday, with USD/JPY off as much as 500 pips from the overnight high as Japan's FX chief Kanda confirms to reporters that Japan have intervened in currency markets. Kanda stated that Japan have taken bold action in markets, and that they have formally intervened. Kanda added that the government are highly concerned about excessive moves in markets and will monitor with a high sense of urgency. Attention turns to an imminent press briefing at 1030BST with the Japanese finance minister Suzuki and the top currency diplomat Kanda.

JAPAN (MNI): BOJ On Hold For Years

Bank of Japan Governor Haruhiko Kuroda insisted on Thursday that the BOJ will not raise interest rates or change its forward guidance for policy rates for years.

NORWAY (MNI): Norges Bank Hikes 50bps; May Slow to 25bps Hikes

Norges Bank delivered an as expected 50 basis point hike, lifting the policy rate to 2.25% Thursday, publishing a rate profile suggesting that the benchmark rate should peak just over 3% before dipping. The Monetary Policy and Financial Stability Committee said the policy rate was most likely to be raised again in November, with its detailed rate profile suggesting that after this latest 50bps hike, it may move in 25bps steps.

SNB (MNI): SNB: Bank Raises Policy Rate by 75bps, Introduces Threshold For Sight Deposits

Swiss National Bank raises the headline policy rate by 75bps, to 0.50%, as expected. The introduction of a threshold to sight deposits is a new element here for SNB policy - the threshold effectively means sight deposits will be treated differently above / below a certain level, with differing rates applied to below the threshold (+0.5%) and above the threshold (0.0%). On inflation forecasts - CPI path only sees a minor bump higher this year and the next, and GDP marked down - both inline with expectations.

EU-RUSSIA (MNI): Brussels Set to Impose New Sanctions After Putin Mobilisation Speech

A number of EU figures have stated that the bloc is set to impose a new round of sanctions on Russia in response to President Vladimir Putin's 21 September speech that saw a 'partial mobilisation' of reserve troops announced, as well as threats to use nuclear weapons.

CHINA (MNI): PBOC Expected to Cut Policy Rates, RRR To Expand Credit

The People’s Bank of China is expected to cut policy rates and lower reserve requirement ratios further in the fourth quarter as it seeks to boost credit expansion by lowering banks’ funding costs, analysts said. The Bank may ease policy by cutting the rate on its medium-term lending facility (MLF) and reverse repo rates again, which combined with lower deposit rates, would lower the cost of funding for banks, said Industrial Securities analyst Huang Weiping.

FOREX: USD/JPY Crushed as Intervention Confirmed

• A frantic morning session for G10 FX was rounded off by confirmation of intervention in currency markets by the Japanese authorities - moving to strengthen the JPY for the first time in 25 years. The results were immediate: USD/JPY has now posted a daily range of over 500 pips, having been sold aggressively off the Y145.90 high.
• Prices appear to be stabilising at around the Y141.00 handle, but price action remains very volatile. Attention turns to an imminent press briefing at 1030BST with the Japnese finance minister Suzuki and the top currency diplomat Kanda.
• Elsewhere, central banks have been busy, with both the Norges Bank and Swiss National Bank raising interest rates. Norges Bank raised rates by 50bps for possibly the last time this cycle, while the Swiss National Bank exited negative rate policy, but introduced tiered rates for sight deposits, implementing a new policy tool in the process.
• Unsurprisingly, JPY is comfortably the best performer across currency markets, with CHF the weakest. The CHF/JPY cross is 2.5% lower on the day and has traded as much as 4.7% off the intraday high.
• Focus turns to the BoE rate decision, at which the bank are expected to raise rates by 50bps to 2.25%. Rate decisions for the Turkish and South African central banks are also due. Data highlights include the weekly US jobless claims data and leading index for August.

BOND SUMMARY: Hugely Busy Morning with Bunds Already Exceeding yday's Range

• Hugely busy morning (although some of the moves have been overshadowed by the even bigger moves in FX!).
• STIR futures are lower across the board this morning, following further reaction to yesterday's Fed dot plot (which was more hawkish than expected).
• Bund futures have already exceeded both the high and low of yesterday's range: At the open they moved to a low of 140.58 but following the hit a low around 7:50 UK time before moving to a high of 142.02 on the day. The moves in USTs and gilts have been more muted in contrast.
• There has been further flattening of Bund and gilt curves as the front-end sells off and the long-end moves higher.
• Focus is now on the BOE. The decision will be announced at midday BST / 7:00ET. There is no press conference today as there is no MPR. The decision for Bank Rate is expected to be between 50bp and 75bp with markets pricing around 67bp but 20/23 analysts looking for a 50bp hike. MNI expects most MPC members will favour 50bp. However, the MNI Markets team also thinks there is a considerable chance that the start of active gilt sales is delayed until after the November MPC meeting given the huge uncertainty over the UK fiscal outlook and potential for a huge increase in gilt issuance from the DMO in coming months. See the MNI BOE Preview here.
• TY1 futures are down -0-12+ today at 113-27 with 10y UST yields up 0.2bp at 3.534% and 2y yields up 4.2bp at 4.093%.
• Bund futures are up 0.61 today at 141.81 with 10y Bund yields down -4.7bp at 1.842% and Schatz yields up 6.8bp at 1.812%.
• Gilt futures are up 0.48 today at 104.06 with 10y yields down -2.6bp at 3.283% and 2y yields up 2.7bp at 3.392%.

EQUITIES: European Stocks Softer After Fed-Induced Weakness Wednesday

S&P E-Minis traded lower Wednesday and cleared recent lows to confirm a resumption of the bear cycle that started mid-August. This strengthens bearish conditions and opens 3741.75, Jul 14 low. The key support at 3657.00, Jun 17 low, has also been exposed. EUROSTOXX 50 futures remain soft following the reversal last week from 3678.00, Jun 13 high. Attention is on a key short-term support at 3423.00, the Sep 5 low. This level has been pierced, a clear break would strengthen bearish conditions and open 3360.00, the Jul 14 low. Short-term gains are considered corrective, first resistance is at 3543.60, the 20-day EMA.

• Japan's NIKKEI closed lower by 159.3 pts or -0.58% at 27153.83 and the TOPIX ended 4.68 pts lower or -0.24% at 1916.12.
• Elsewhere, in China the SHANGHAI closed lower by 8.267 pts or -0.27% at 3108.91 and the HANG SENG ended 296.67 pts lower or -1.61% at 18147.95.
• Across Europe, Germany's DAX trades lower by 70.89 pts or -0.56% at 12696.06, FTSE 100 lower by 19.64 pts or -0.27% at 7217.95, CAC 40 down 41.11 pts or -0.68% at 5990.22 and Euro Stoxx 50 down 19.56 pts or -0.56% at 3472.31.
• Dow Jones mini up 92 pts or +0.3% at 30368, S&P 500 mini up 10 pts or +0.26% at 3815.5, NASDAQ mini up 25 pts or +0.21% at 11732.25.

COMMODITIES: Gold Bounces Off Lows on JPY Intervention

Gold is consolidating and the recent pause in the downtrend appears to be a bear flag formation. This pattern reinforces a bearish theme. The recent break of support at $1681.0, the Jul 21 low, confirmed a resumption of the downtrend that started early March. Attention is on $1640.9 next, the Aug 8 2020 low. In the oil space, the WTI futures outlook is bearish and yesterday’s gains are considered corrective. The recent break of support at $85.37, Aug 16 low, confirmed a resumption of the downtrend that started Jun 8. A resumption of weakness would open $79.83 next, the Feb 18 low. Firm resistance is at $89.59, the 50-day EMA.

• WTI Crude up $0.91 or +1.1% at $83.99
• Natural Gas down $0.07 or -0.86% at $7.717
• Gold spot down $2.19 or -0.13% at $1670.22
• Copper up $3.25 or +0.94% at $350.4
• Silver up $0.08 or +0.42% at $19.6171
• Platinum down $3.11 or -0.34% at $907.1