The report of martial law in South Korea the week before last was a surprise. Immediately afterwards, the yen strengthened to around 148.65 yen on ‘risk-off buying’, but the parliament rejected martial law and the dollar/yen was bought.
Furthermore, Jiji Press reported that the BoJ would not raise interest rates before the end of the year, which led to a considerable amount of intermittent buying back of short positions in the dollar-yen.

However, when Bloomberg reported that ‘BOJ in no rush to raise rates, risk of price acceleration small even if rate hike postponed this month – official’, the dollar plunged to 151.00 yen at the moment and then surged to 152.80 yen. The drop to 151.00 yen at the moment may have been due to the fact that some policymakers were also quoted as saying that they would not oppose a rate hike if it was proposed at the December meeting. The overall report reads that the risk of higher inflation is small, so it seems likely that there will be no rate hike at this week’s BoJ policy meeting. The yen was about to rise a little more, but the momentum for a rate hike appears to have disappeared after repeated current affairs and MNI reports. There is a small risk of a gradual release of surprisingly far-from-expected figures, perhaps in the 140-160 yen range, followed by a break above 160 yen and further yen weakness.

The Swiss Central Bank cut interest rates by 0.5% and set the policy rate at 0.5%. The Swiss CPI is already -0.1%, back to pre-Corona levels. Inflation in Europe and the US is likely to settle down like in Switzerland in the future. This is an unexpectedly large rate cut, but not entirely unexpected, as the probability of a 0.5% cut was higher immediately prior to the cut. Therefore, further selling where the Swiss franc has fallen will not work. The dollar-Swiss continued to rise in the wake of this significant Swiss rate cut, while the yen, which is considered to have the same characteristics, was also exposed to selling as the prospect of a rate hike disappeared. The Bank of Japan’s Tankan was slightly better than expected, but not enough to affirm a rate hike; the JGB rose (rates fell) on short-covering to the 1.03% level; and the Swiss dollar was down on the back of the Bank of Japan’s policy statement, which was weaker than expected, but not enough to affirm a rate hike.

The Bank of Australia’s policy announcement was unchanged as expected, but the Australian dollar fell immediately after the announcement as the phrase ‘policy needs to be sufficiently restrictive’ was removed, blotting out a rate cut from February onwards.

The FOMC is expected to cut rates by 0.25%, but the content is expected to be hawkish, such as the dot plot, which has led to a stronger dollar, higher US interest rates and a sell-off in sheltered currencies such as the Swiss franc and the yen. This is so-called risk-on. This trend may continue in the near term.