Japan's Finance Ministry's Vice Finance Minister for International Affairs Kanda spoke in the Tokyo morning. Kanda is the MoF official who will instruct the BOJ to intervene, when he judges it necessary, and is often referred to as Japan's 'top currency diplomat'. Kanda made some blunt comments to support the yen, the strongest warning since mid-August, with remarks along the lines of:

  • "We won't rule out any options if speculative moves persist."
  • "Needless to say, it's important for currency moves to reflect fundamentals."

As an aside, as the Vice Finance Minister for International Affairs, I am sure Kanda understands very well that a 500 or basis point differential between US and Japanese yields is a very strong fundamental in favour of a weaker yen. But, he is a politician, and as we all know and are reminded of over and over again, facts don’t mean very much a lot of the time.

USD/JPY dipped to lows circa 147.40 but soon bounced back (facts are like that, and verbal intervention is just words) to retest 147.80. USD/JPY is around 147.50 as I post.

A few hours later we had actual intervention, this time Chinese state-owned banks were in the market selling USD/CNY to support the yuan. Buying the onshore yuan (CNY) impacted the offshore, CNH, supporting it also. Prior to the intervention the People’s Bank of China had set the reference rate for the day at the weakest for the CNY since August the 22nd. Having said this, the reference rate was nevertheless set at 11+ big figures from the modelled estimate. The PBOC has not yet given up on efforts to support the yuan at its daily setting.

While in China, Chinese state media outlet the Securities Times had an article today saying that home buying restrictions in place in the past are no longer appropriate and that policies curbing real estate purchases and sales in non-first-tier cities shall be swiftly removed based on the specific circumstance of the individual cities. Property developer stocks rose.

On the data front was Australian Q2 GDP, which came in better than expected. For those picking apart the headlines though, productivity is weak and the data showed a ‘per capita’ recession for Australia. This is not a recession as the headlines would have it, but a further slowing of already weak consumer spending means the chance of a recession ahead hovers around a 50-50 bet.

Apart from yen and yuan major FX traded in subdued sorts of ranges.

Asian equity markets:

  • Japan’s Nikkei 225 +0.68%

  • China’s Shanghai Composite -0.45%

  • Hong Kong’s Hang Seng -0.86%

  • South Korea’s KOSPI -0.65%

  • Australia’s S&P/ASX 200 -0.68%

Offshore yuan update:

usdcnh intervention wrap chart 06 September 2023