US stocks advanced as crude oil prices plunged again, while USD/JPY fell sharply. The yen-selling trend continued even after the Bank of Japan announced a rate hike, and markets in late September were driven by both oil-price developments and geopolitical risks.
US stocks were supported by the sharp drop in crude oil prices. The Dow was soft, but the Nasdaq held near its highs. Nikkei 225 futures continued to rise into the start of the week, and a positive tone spread across Japanese equities after Silver Week.
At its September meeting, the Bank of Japan raised its policy rate by 0.25 percentage points to 1.25%. The vote was 7 in favor and 2 against, and market reaction after the press conference was capable of moving in either direction, toward yen depreciation or appreciation. As of 9/22, USD/JPY rose to the ¥157.70 range before turning toward yen appreciation again at 17:45 that day.
The sharp drop in crude oil prices was driven in part by Iran’s proposal to open the Strait of Hormuz and the resumption of operations at Saudi Arabia’s East-West pipeline, affecting trends in dollar demand. There was also a period when speculative long yen positions expanded sharply, which has been cited as one factor supporting momentum toward a weaker yen and stronger dollar.
The market is focused on this week’s key events, including the US-China summit on 9/24. US stocks are expected to remain firm against the backdrop of lower oil prices, although developments could diverge depending on geopolitical risks and fiscal policy trends.
Nikkei 225 futures have maintained an upward trend from the pre-Silver Week close of ¥65,018, and attention is focused on developments from the end of this week onward.