Financial Analyst/Content Writer, RADEX MARKETS
Lawrence J. came from a strong technical and engineering background before pivoting into a more financial role later on in his career. Always interested in international finance, Lawrence is experienced in both traditional markets as well as the emerging crypto markets. He now serves as the financial writer for RADEX MARKETS.
ХУВьЦАА
A major war escalation is unfolding in the Middle East, as tensions erupted on both sides of the Arabian Peninsula on Tuesday. In the Persian Gulf, an attempted IRGC attack against a US Navy aircraft carrier operating in the region led to a retaliatory strike against multiple Iranian tankers near Kharg Island. The counterstrike sank one tanker and left two more permanently disabled, and Iran has threatened a retaliation of its own against oil tanker crews ‘in the areas around the ports of Kuwait and Bahrain’. The events that unfolded in the Red Sea meanwhile are, if anything, even worse. Houthi rebels launched a barrage of missiles and drones against four different cities across Saudi Arabia, injuring over 70 people, including women and children, according to military officials. Yesterday’s attack marks the largest offensive observed in several months and Saudi forces are already in the midst of mustering a response aimed at Yemeni territories. Both sides of the conflict are now in danger of entering an endless spiral of escalation and any prospect of peace seems further removed than ever.
The bells of war sounded throughout financial markets, striking fear among investors and economists alike. The Brent Crude benchmark rose to within a hair’s breadth of $100 per barrel on the November contract on Tuesday and remains perilously close to three figures as of this morning. Precious metals retreated to the shadows, as gold fell over 1% to $4,355 per ounce and silver edged back down to $65. It was rough day for the Dow Jones, which lost over 600 points during yesterday’s session as tit-for-tat trade war antics between the US and Canada took their toll on the index. The story was somewhat different in cryptocurrencies however, where Bitcoin once again showed a surprising degree of resilience, forfeiting only a few hundred dollars over the course of the day. The newfound maturity in crypto markets is worth keeping an eye on as time progresses, particularly in light of a potentially more favourable regulatory landscape just around the corner.
The Japanese yen continued its ascent over the last two days, following on from last week’s blistering performance. Last night, purchasing a US dollar required a mere 154 yen, down from almost 164 at the end of July. The yen is now at a seven-month high against the greenback – something that would have been inconceivable just a few weeks ago. The Bank of Japan has been aggressively signalling that it intends to raise the interest rate on its currency at an accelerated rate and economists are confidently predicting a 25-bps rate hike to 1.25% during next week’s scheduled meeting. The heavily priced-in decision will arrive only three months after the last rate hike carried out in June, but shockingly, may not be the final adjustment of the year. Many are now predicting a third rate hike before 2027, or at the very least a shortened normalisation period for the yen, hence the dramatic surge observed over the last week or so. Another factor currently playing out is the systematic dismantling of leveraged short positions as the yen gains strength. With trillions of yen in bearish bets still in the place, a self-reinforcing short unwind is very much a possibility.
A healthier yen is largely beneficial to everyone. From Japanese consumers to the Bank of Japan itself, a stronger currency gives both more breathing room. A controlled normalisation of the yen also safely disarms the possibility of an explosive carry trade unwind at a later date, settling US and even global equities. The benefits also spread to the US Treasury, which will no longer be as concerned with Japan having to dump huge amounts of US treasuries in an emergency. USDJPY fell sharply again earlier this morning, with the pair pushing towards 153.
About the Author
Lawrence J. came from a strong technical and engineering background before pivoting into a more financial role later on in his career. Always interested in international finance, Lawrence is experienced in both traditional markets as well as the emerging crypto markets. He now serves as the financial writer for RADEX MARKETS.
Reviewed by RADEX MARKETS
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Дериватив болон хөшүүрэгтэй бүтээгдэхүүнээр арилжаа хийх нь өндөр эрсдэлтэй бөгөөд таны анхны хөрөнгө оруулалтаас давсан алдагдал хүлээх эрсдэлтэй. Арилжаа хийхээсээ өмнө манай Нөхцөл, болзол (T&C) болон Бүтээгдэхүүний мэдээллийн баримт бичиг (PDS)-ийг уншина уу.
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