The Japanese Yen continues to weaken sharply despite expectations of an upcoming Bank of Japan (BoJ) rate hike and ongoing verbal interventions from Japanese officials. This persistent decline may reflect market frustrations that the BoJ delayed tightening for too long and is now poised to implement a cautious rate increase just as other major central banks are adopting more hawkish policies.
The market has largely priced in a BoJ rate rise this month, with at least one more anticipated in 2026. Consequently, there is limited scope for the yen to strengthen further on a hawkish repricing, restricting upside potential for the currency.
In Chinese technology news, the Financial Times reports that regulators in China are considering allowing limited access to Nvidia’s H200 chips, although no final decision has been reached. This follows the US announcement by former President Trump permitting Nvidia to sell H200 chips to China. The move is part of ongoing competition between the US and China, with China restricting foreign AI chips such as Nvidia and AMD in state-funded data centres to promote domestic technology development.
US equity indices showed mild weakness on this news but recovered quickly, indicating that the market views this as largely expected.
On the trade and economic data front, Germany’s October trade surplus came in at €16.9 billion versus expectations of €15.6 billion. The US November NFIB small business optimism index rose to 99.0, beating forecasts of 98.3.
From Japan, Prime Minister Takaichi has stated that specific monetary policy decisions rest with the BoJ, but he is ready to take appropriate FX action if necessary. BoJ Governor Ueda expressed confidence that Japan’s economy will return to positive growth in the fourth quarter and beyond. He also noted that the certainty of the BoJ’s economic outlook materialising is gradually increasing.
Meanwhile, within Europe, ECB Executive Board member Nagel highlighted the potential for artificial intelligence to enhance the processing of large datasets and improve forecasting accuracy.
In Australia, the Reserve Bank of Australia (RBA) has shifted towards a clearer hawkish bias. RBA Deputy Governor Bullock indicated that if upcoming data points to inflation not slowing down, this will be factored into the policy decision in February.
Finally, former President Trump told Politico in an interview that he might consider adjusting tariffs to lower some prices and that the willingness to reduce interest rates will be a key factor in selecting the next Federal Reserve Chair. While tariff reductions could stimulate the global economy in the short term, they may also drive inflation higher. Given central banks’ recent responses to tariff-driven shocks with lower interest rates, any renewed inflation pressures could force tighter monetary policy, which would weigh on risk assets.
Key events to watch include FX option expiries at 10am New York time on 9 December.
Original Source: Giuseppe Dellamotta of investinglive.com
