The latest Market Talks covering FX and Fixed Income. Published exclusively on Dow Jones Newswires throughout the day.
2017 ET - The macroeconomic environment needs to change to reverse the trend of yen weakness, despite suspected yen-buying intervention by Japanese authorities overnight, ING's Chris Turner says in a research report. "If the ING house call of unchanged Fed rates in September is correct, Japanese authorities have a chance of turning this trend," says the global head of Markets. "We're less convinced that a decisive [dollar-yen] move lower will be driven by the BoJ hawkishness, unless there is a huge surprise at BoJ meeting," Turner says. The dollar is 0.5% higher at 160.27 yen after falling as much as 3.3% to Y157.96 on Thursday, lowest intraday level since May 14, LSEG data show.(ronnie.harui@wsj.com)
2009 ET - JGBs edge lower in price terms in early Tokyo trade ahead of the BOJ's rate decision due today. With Japan's central bank likely to leave rates unchanged, "focus will be on forward guidance," J.P. Morgan Private Bank's Yuxuan Tang says in an email. "Markets currently price only one additional full rate hike by year-end," says the Asia Head of Rates & FX Strategy. "On the BOJ's explicit mandates of inflation and economic activity, the case for materially tighter policy remains limited," Tang adds. The 10-year JGB yield is up 0.5 bps at 2.800%. (ronnie.harui@wsj.com)
1942 ET - Japanese stocks may rise following U.S. technology stock gains overnight. Nikkei futures are up 3.3% at 63900 on the SGX. The dollar is at 160.12 yen, down sharply from Y163.60 as of Thursday's Tokyo stock market close. Investors are focusing on the Bank of Japan's rate decision due later Friday as well as developments in the Middle East. The Nikkei Stock Average rose 0.7% to 61867.43 on Thursday. (kosaku.narioka@wsj.com)
1604 ET - Treasury yields are mixed as markets get mixed signals from the Fed while the U.S.-Iran war heats up. U.S. GDP slows in 2Q and PCE inflation cools in June, as expected. Tomorrow, consumer sentiment is expected to tick higher, according to WSJ consensus. Markets price an interest rate increase in September, following the Fed hold with three hike dissents. But Chairman Warsh's comments are perceived by many observers as an indication that it won't take much to convince the FOMC to hold again. The 10-year yield rises 0.041 percentage point to 4.662%. The two-year, which is more sensitive to Fed moves, slips 0.007 p.p. to 4.227%. (paulo.trevisani@wsj.com; @ptrevisani)
1503 ET - Fed Chairman Warsh's remarks after yesterday's hold are seen as dovish, and that may have pushed the BoJ to step in to boost the yen, TS Lombard's Rory Green writes. Markets speculate that intervention may be behind a 2.7% decline of the dollar versus the yen. Green says a dovish Fed may have offered an opportunity for the Ministry of Finance to intervene. He also notes that previous interventions have been followed by interest rate increases. "A move tomorrow would still be a surprise, but the meeting is now live," Green says. The strengthening yen comes as the WSJ Dollar Index falls 1% and the greenback weakens 0.5% against the euro. (paulo.trevisani@wsj.com; @ptrevisani)
1437 ET - A note from Oxford Economics says lower-income households will need to rebuild their savings cushion after this year's energy price surge. "The personal saving rate is hovering at 2.7%, below its 2025 average of 4.6%," they say. The personal savings rate has not been this low since June 2022, when it was 2.2%. Further gains in household net wealth will remain a tailwind to spending by older, wealthier consumers, Oxford Economics adds. (jessica.coacci@wsj.com)
1409 ET - The yen will likely need more than government intervention to gain sustainable strength, Insight Investment's Alex Moloney says. The dollar weakens 2.7% against the Japanese currency, fueling unconfirmed speculation that Tokyo has stepped in to support the yen. Authorities have recently moved to dissuade locals from sending money overseas, as a way to boost demand for yen assets. Moloney says a more hawkish central bank is needed. "If we were to see the Bank of Japan get to the head of the curve and start to hike rates more aggressively, more speedily, then that would support the yen going forward." The BoJ is expected to hold rates steady Friday. (paulo.trevisani@wsj.com; @ptrevisani)
1321 ET - Government action too boost the yen hasn't been officially confirmed, but "we would expect, given the size of the move today, that we would have some commentary from officials within the coming days...to either confirm or deny that any intervention took place," Insight Investment's Alex Moloney says. The greenback weakens 2.3% against the yen, compared to a nearly 1% fall in ICE's DXY dollar index and a 0.5% decline versus the euro. Moloney warns that "if there is a large dollar seller in the market, it does sometimes trip over sort of systematic models as well," which could explain the outsized USDJPY move. (paulo.trevisani@wsj.com; @ptrevisani)
1234 ET - Bitcoin ETFs, which have been a key indicator followed by cryptocurrency markets to gauge institutional interest in the space, have had a streak of outflows in recent days. But it looks like it's turned the corner, with bitcoin ETFs posting a net inflow of $32.1 million yesterday, according to data from CoinGlass. That snapped a 4-day losing streak for the ETFs, coinciding with the Federal Reserve's decision to leave interest rates unmoved. CoinMarketCap's Fear and Greed index is inching back to a "neutral" outlook, and is at 37-out-of-100 today -- the high end of scores indicating "fear." Bitcoin is up 1.9% to $64,657. (kirk.maltais@wsj.com)
1222 ET - The sharp 2.4% rise in the Japanese yen against the dollar raises the prospect that the Japanese government intervened to prop up the currency ahead of the Bank of Japan's policy decision. "This is a classic intervention by the BOJ," said Joe Brusuelas chief economist for RSM. "The point of their intervention will be signaling to investors: do not engage in unwise speculation, and if you do, be prepared to pay the price with sharp turns like we are seeing today in the FX market." The Bank of Japan is holding its policy meeting Friday in Tokyo. (jessica.coacci@wsj.com)
1204 ET - Bitcoin has shed over 50% since finding all-time highs last year, raising the question if cryptocurrencies have become passe and not economically viable. But this has happened at least five times before, says Chris Bendiksen of CoinShares in a note, and resulted with bitcoin soaring to new highs. That doesn't make a rebound in prices certain, but it is the pattern that bitcoin has stuck with since its inception. "History suggests that such moments have tended to represent extremes of pessimism rather than the beginning of any structural downturn," Bendiksen says. "On every prior occasion, quantitatively, bitcoin has been worth more one year later than it was at the point of that first touch." Bitcoin is up 2% to $64,712. (kirk.maltais@wsj.com)
1125 ET - Fed Chairman Warsh's indication that inflation gauges other than the PCE will play a bigger role in monetary policy reduces the chances of an interest rate increase soon, Citi's Andrew Hollenhorst and Veronica Clark write. Core June PCE cools to 3.3% from 3.4%. For comparison, core CPI was 2.6%, much closer to the Fed's 2% inflation target, Hollenhorst and Clark say. "Over the next couple months it should become increasingly apparent that the broader set of inflation metrics Warsh is watching are not showing a concerning acceleration in inflation," the economists say. Markets price 59% odds of a hike in September, according to CME, and the authors suggest it could be a mistake.
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