BoJ Intervention, Interest Rate Increase, Russia Protests – What Moves Markets

BoJ Intervention, Interest Rate Increase, Russia Protests – What Moves Markets

By Jeffrey Smith

Investing.com – The Bank of Japan steps in to support the yen for the first time in 24 years. Rate hikes from the Philippines to Switzerland (and possibly the UK) come after another 75 basis point increase from the Federal Reserve, but US stocks are set to open flat after a wild ride on Wednesday. Darden and Costco restaurants have reported profits, and a wave of protests and immigration hit Russia as Vladimir Putin tries to rally fighters to fill his weary ranks in Ukraine. Here’s what you need to know in the financial markets on Thursday, September 22nd.

1. The Bank of Japan raised the Japanese yen for the first time since 1998

The Fed’s hike triggered the first direct intervention in foreign exchange markets by the Bank of Japan since 1998, which briefly cut a 24-year low against the unstoppable dollar.

To support the currency despite leaving its policy settings unchanged at its overnight meeting, Governor Haruhiko Kuroda reiterated that he expects to exit his agreement next year due to underlying weakness in Japanese domestic demand.

The dollar had risen above 145 yen before the BoJ’s intervention after the Federal Reserve widened the interest rate differential between the two central banks’ policy rates by raising another 75 basis points on Wednesday.

2. Central Bank hikes from Manila to Zurich … and possibly London

One central bank that – finally – matched the Fed’s move to move was sending more than 1% higher against the dollar. The SNB also introduced a tiered system on how to compensate banks’ reserves, incentivizing banks to reduce their excess liquidity and thus help tighten financial conditions.

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Central banks in Poland have all opted for slightly smaller steps of 50 basis points, and the Bank of Norway echoed the Bank of Japan in anticipating a relatively rapid decline in the coming year.

This leaves the decisions of the Central Bank of Turkey still pending. The Bank of England is expected to raise its key interest rate by 50 basis points, with markets also remaining anxious as to whether it will go ahead with its plans to start selling bonds from its QE portfolio, at a time when the new government faces a huge jump in borrowing to fund it. .

3. Set the arrows to open flat. Unemployment Claims, Costco Earnings Due

US stock markets are set to open flat after the upheaval that followed the Federal Reserve’s decision on Wednesday. While a 75 basis point hike was more moderate than the two results seen as possible from the meeting, the dotted chart of policy makers’ interest rate expectations suggests that the central bank hasn’t finished tightening just yet, not for long.

By 06:15 EDT (10:15 GMT), it was up 28 points, or 0.1%, while it was down less than 0.1%, falling a little more.

The second quarter data is due at 08:30 ET but is unlikely to have a significant impact while Fed Chairman Jerome Powell’s hawkish guidance continues to ring in market ears.

Accenture (NYSE :), FactSet (NYSE:) and Darden Restaurants (NYSE:) are all set to report earnings before the opening, while Costco (NASDAQ 🙂 will report after the close.

4. Protests and a wave of immigration hit Russia after a call for mobilization

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More than 1,000 people have been arrested after a wave of protests across Russia to protest the mobilization of reservists to fight in Ukraine. Footage on social media and flight booking sites indicated that men of fighting age sought to flee the country in droves, creating lines stretching dozens of miles across Russia’s borders with Finland, Georgia and even Mongolia.

The written decree ordering the mobilization did not mention the exceptions and qualifications President Vladimir Putin presented in his address to the nation, indicating that the authorities would aim to collect much more than the 300,000 increase announced.

Meanwhile, in Ukraine, Russia launched a barrage of missiles at residential buildings and civilian infrastructure in the city of Zaporizhia, where it intends to hold a referendum on joining the Russian Federation at the end of the week.

5. Oil stability after the dollar-led decline

Crude oil prices stabilized overnight after other risky assets declined in the wake of the Federal Reserve’s decision. To make the Fed more expensive, the Fed has also made oil and any other dollar-priced commodity more expensive for the rest of the world, which is increasingly putting pressure on analysts’ forecasts of demand.

By 06:30 ET, futures were up 0.3% at $83.20, after bouncing off overnight support levels without setting a new low for the week. It rose 0.3 percent to $90.07 a barrel.

Prices were also pressured on Wednesday by the US government, which reported the largest weekly increase since July, indicating that final demand from the US economy is weakening slightly faster than expected.

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