usdyen wrap 02 August 2022

The post-FOMC unwind of long USD/JPY carried on further again in Asian morning trade on Tuesday. USD/JPY dropped hard and fast, to lows (briefly) under 130.50. Japanese finance minister Suzuki made comments decrying the ‘rapid yen moves’. He, and other Japanese officials, had been very vocal indeed about not wanting such rapid yen FX moves when the currency was weakening but its taken 700-odd points of fast USD/JPY decline for Suzuki to make a similar remark as yen has gained back some strength. USD/JPY is probably around an acceptable level for Suzuki and the government at current levels, hence his commens today trying to stem the drop. I don’t think what the Japanese government wants from the exchange rate is of much importance right now though. They certainly showed their worthlessness on the way up for USD/JPY.

The focus of the session was on geopolitics, specifically the likely visit to Taiwan by US House Speaker Nancy Pelosi. Media reports are saying Pelosi is expected to arrive in the country on Tuesday evening. China has objected, in strenuous terms, to the visit. The Taiwanese military have said they have increased their combat readiness but have not raised their alert level. So far China has flown its warplanes close to Taiwanese airspace and sent its warships close also.

Regional stocks are shaky, lower on the session. The Hang Seng, Nikkei, Shanghai Comp, China A50, Australia, KOSPI, all lower.

On the central bank front we had intervention again from the Hong Kong Monetary Authority to prop up the HKD (its fallen to the weak end of its trading band). Still to come is the Reserve Bank of Australia decision, due at 0430 GMT. A 50bp rate hike is widely expected, there are previews in the points above.