Following Fed Chair Warsh's speech in Jackson Hole, USD/JPY reclaimed the 160 level for the first time in a month. The euro was sold, while U.S. long-term yields rose and movements in stocks and gold were also affected. Future Japan-U.S. interest-rate trends and concerns about intervention will be key factors.
USD/JPY rose sharply following Fed Chair Warsh's speech in Jackson Hole, with buying taking it to 160.20. Although the speech avoided a direct reference to rate hikes, it included language suggesting the possibility of future hikes, prompting dollar buying. EUR/USD continued to fall, declining to around 1.1578.
In equity markets, the major three indexes edged lower against the backdrop of Chair Warsh's hawkish comments. The Nasdaq fell 47 points, while bonds continued to decline. The 10-year U.S. Treasury yield rose into the 4.71% range, and movements in long-term yields supported the stronger dollar. Gold fell sharply, while crude oil edged lower.
Factors to watch include July industrial production (preliminary), China's August manufacturing and services PMIs, consumer price-related indicators in Europe and the United States, and the G20 Finance Ministers and Central Bank Governors Meeting. The market is expected to see a widening trading range around 16:00, while views have been expressed that this weekend's U.S. employment report will be a market factor.
As for the event background, concerns about intervention by the U.S. government are increasing, while expectations of a rate hike at the Bank of Japan's next meeting are also emerging. Japan-U.S. exchange-rate trends and the impact of intervention are therefore the market's focus.