BOJ Rate Hike Expectations Strengthened by Japanese Yen Gains
The Japanese yen has been gaining strength in recent days, and analysts believe this trend may help facilitate the Bank of Japan's (BOJ) work. According to recent data releases from Japan, the real wages rose by 0.2% in July, which is consistent with the BOJ's rate hike expectations. However, the weaker-than-expected upward revision in GDP suggests that a 25bps BOJ move may be more likely than a larger increase of 50bps.
This could result in less work for the central bank through the FX channel, as markets oblige and help the BOJ through currency fluctuations. The yen has been extending its gains on Tuesday, with USD/JPY falling by 0.3% to 153.80, its lowest level since mid-February.
In other news, China's August foreign reserves reading rose above estimates to $3.438T, and the country's trade surplus is expected to be a key topic when Trump and Xi hold their expected meeting this month. The US trade deficit with China widened to $29.2B in August, and Chinese executives may join President Xi's US trip as part of ongoing trade talks.
On the other hand, Australian confidence data has been battered by inflation and property market concerns. RBA Assistant Governor Hunter stated that the housing market remains an immediate impact channel from monetary policy decisions, and the RBA is paying close attention to rents in CPI.