The Swiss Central Bank cut interest rates by 0.25% and set the policy rate at 1.00%. EURCHF was down from 0.9490 to around 0.9435, but is now back up.

China has launched a relatively large economic stimulus package, and its impact is likely to spread to all parts of the world. The euro’s buyback is presumed to have been influenced by this. Last week’s worsening eurozone PMI accelerated euro selling, especially in the euro-pound, but it is being unwound. If the Chinese economy can recover to 5% growth, it can be assumed that global economic stability = risk-on, and the yen sell-off will be strongly influenced by this. In particular, the fact that the yen is selling even though the dollar yuan is below 7.00 suggests that there was a yuan buying and yen selling flow.

In Japan, the ruling Liberal Democratic Party (LDP) held its presidential election, with Takaichi coming out on top in the first round of voting, but Ishiba narrowly outperformed him in the runoff to become the new president. The market was expecting a strong yen if Ishiba was elected, a weak yen if Takaichi was elected, and a neutral yen if Koizumi was elected, so the dollar was trading at 146.50 yen and the Nikkei was trading at 39,829 yen, but the yen strengthened to around 142.80 yen and stocks fell below 38,000 yen in overnight trading, down nearly 2,000 yen. The price plunged nearly 2,000 yen. Ishiba’s policies are said to be anti-Abbenomics, but as was the case with the Kishida administration, there are many things he cannot do when it comes to actually implementing his policies. There is no reason why stock prices should continue to plummet. We will have to wait and see the cabinet appointments and other factors to make a decision.

This makes it easier for the BOJ to move. In the near term, the BOJ will be looking to see how far the yen will appreciate, but as Governor Ueda has said, “We must avoid a return to deflation,” this does not mean that interest rates can be raised rapidly. For the time being, the yen will probably hover around the 140-yen level, and the rest will depend on the U.S. situation.

At the beginning of the week, U.S. Chairman Jerome Powell is scheduled to speak. He is expected to comment that the U.S. economy is OK, but that he will be careful about cutting interest rates.