On the afternoon of September 11th, a thrilling scene occurred in the financial market: the US dollar index suddenly fell sharply, the Japanese yen fell, the Chinese yuan soared, and global stock markets suddenly plunged.
The US dollar index suddenly plummeted rapidly. As of press time, it was reported at 101.3607, with a intraday decline of 0.31%.
The US dollar fell to 140.7195 against the Japanese yen at one point, hitting a new low since the beginning of the year.
The Chinese yuan surged nearly 200 points.
Major global stock index futures have plummeted one after another.
The Japanese and Korean stock markets experienced a sharp decline. Among them, the Nikkei 225 index fell more than 2.5% during trading and closed down 1.49% at 35619.77 points, hitting a new low in nearly a month, with most constituent stocks falling.
Some A-shares followed suit and fell in the afternoon. As of press time, the Shanghai Composite Index has fallen by over 1%. Dividend stocks continue to decline, led by sectors such as oil, coal, electricity, and banking.
Speech by the Bank of Japan
Bank of Japan board member Junko Nakagawa stated that if prices and economic prospects meet expectations, there is still a possibility of interest rate hikes in the future.
Nakagawa also pointed out that even if interest rates are raised, financial conditions will still remain loose. She also stated that the central bank needs to pay attention to the risk of price increases, as real interest rates are currently at a very low level.
Most economists expect the Bank of Japan to maintain policy unchanged at its meeting on September 20th, and many believe that the authorities may have to wait until December or January next year to take the next action.
Some officials from the Bank of Japan also believe that it is almost unnecessary to raise the benchmark interest rate during next week's interest rate meeting, as they are still concerned about the lingering volatility in financial markets and the impact of the July rate hike.
Bank of America strategists insist on the prediction that the yen will regain its downward trend before the end of the year, and expect the yen to fall below 150 against the US dollar.
Morgan Stanley strategists warn that if the Federal Reserve significantly cuts interest rates in September, US stocks may face the risk of further liquidation in yen arbitrage trading. If the initial interest rate cut exceeds 25 basis points, it may stimulate further strengthening of the yen, which will prompt yen traders to withdraw from US assets after domestic interest rates rise, and the global market will repeat a turbulent pattern.
Shusuke Yamada, Chief Japanese Foreign Exchange/Interest Rate Strategist at Bank of America, wrote in a report that the yen may regain its downward trend as market pricing overdraws the potential rate cuts by the Federal Reserve and exaggerates the prospect of capital flowing back to Japan due to the narrowing of the US dollar/yen spread.
Global waiting for tonight's heavyweight data
Since August, unexpected non farm payroll data has become the trigger for the accelerated decline of the US dollar index: although the number of new non farm payroll jobs in August was higher than before, it fell short of expectations, and at the same time, the number of new non farm payroll jobs in June and July significantly decreased.
At present, the market is focused on the Federal Reserve's September interest rate meeting, and the August US CPI data released at 20:30 Beijing time on September 11th will be the last heavyweight data before the meeting.
At present, the market generally believes that the Fed's September interest rate cut is a certainty, but there is still controversy over the magnitude and speed of the rate cut.
On September 11th, the Chicago Mercantile Exchange's Federal Reserve Watch tool showed that futures market pricing indicated a 33% probability of a 50 basis point rate cut by the Federal Reserve on September 18th, and a 67% probability of a 25 basis point rate cut. The probability of a 50 basis point rate cut has increased compared to the previous trading day.
Goldman Sachs forex analyst Isabella Rosenberg stated that the upcoming Fed rate cut poses limited downside risk to the US dollar as other central banks are also relaxing their policies. If most central banks relax monetary policy together, it can be expected that this will limit the impact of the Federal Reserve's monetary policy relaxation on the US dollar.
As of now, central banks in countries such as Canada, the United Kingdom, Switzerland, and Sweden have initiated interest rate cuts before the Federal Reserve adjusts interest rates to address their respective economic conditions and inflation levels.