
The JPY has reversed its fortunes to become the best-performing DXY currency this year, appreciating 1.5% YTD against the USD overnight. This was a far cry from late July, when the JPY was the second-worst DXY currency, chalking up a 4.4% YTD loss. Apart from declining below its end-2025 level of 156.70, USD/JPY’s downside risk has also increased due to a break of a major trendline.
The joint US-Japan intervention in late July was a game changer that established a stronger official backstop against disorderly JPY depreciation. US Treasury Secretary Scott Bessent August 18 announcement to double buybacks of long-dated US Treasuries also shifted fiscal deficit worries from Tokyo to Washington. Bessent reframed “Takaichi-nomics” as graduating from Abenomics towards fiscal discipline and monetary tightening that support currency stability. Conversely, US President Donald Trump and some of his officials have pushed the Fed to cut rates, bucking the market’s pricing for a rate hike at next week’s FOMC meeting, following last Friday’s stronger-than-expected US monthly jobs report.
The JPY may also be transitioning from a policy-recovery story. The broadening of JPY gains beyond the USD is significant, weakening the carry trade that had undermined the JPY’s traditional haven status during much of Trump’s second term. Hence, markets will pay close attention to the Bank of Japan’s guidance on September 18, whether subsequent hikes could arrive sooner or be larger than expected.
Quote of the Day
“I saw the angel in the marble and carved until I set him free.”
Michelangelo
Today in history
Michelangelo's iconic statue of David was officially unveiled to the public in Florence on September 8, 1504.



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