BoJ Intervention, More Rate Hikes, Russia Protests – What’s Moving Markets

The Bank of Japan intervenes to prop up the yen for the first time in 24 years. Rate hikes from the Philippines to Switzerland (and probably the U.K.) follow another 75 basis point increase from the Federal Reserve, but U.S. stocks are set to open flat after Wednesday’s wild ride. Darden Restaurants and Costco report earnings, and a wave of protests and emigrations hit Russia as Vladimir Putin tries to round up fighters to fill his depleted ranks in Ukraine. Here’s what you need to know in financial markets on Thursday, 22nd September.

1. BoJ props up yen for first time since 1998

The Federal Reserve’s latest interest rate hike triggered the first direct intervention in foreign exchange markets by the Bank of Japan since 1998, briefly dragging the yen off a 24-year low against an unstoppable dollar.

The BoJ intervened to prop up the currency despite leaving its own policy settings unchanged at its meeting overnight, Governor Haruhiko Kuroda repeated that he expected inflation to come down of its own accord next year due to the underlying weakness in Japan’s domestic demand.

The dollar had surged above 145 yen prior to the BoJ’s intervention after the Fed widened the interest rate differential between the two central banks’ policy rates with another 75 basis point hike on Wednesday.

2. Central bank hikes from Manila to Zurich…and probably London

One central bank that did – finally – match the Fed step for the step was the Swiss National Bank, sending the Swiss franc more than 1% higher against the dollar. The SNB also introduced a tiering regime on how it remunerates bank reserves, incentivizing banks to whittle down their own excess liquidity and thus help to tighten financial conditions.

The central banks of Norway, Indonesia and the Philippines, all opted for slightly smaller steps of 50 basis points, Norges Bank echoing the BoJ in predicting a relatively quick decline in inflation next year.

That leaves decisions from the Bank of England and the central bank of Turkey still outstanding. The BoE is expected to raise its key rate by 50 basis points, with markets also on tenterhooks to see if it will press ahead with plans to start selling bonds from its QE portfolio just as a new government faces a big jump in borrowing to fund its energy subsidy programs.

3. Stocks set to open flat; jobless claims, Costco earnings due

U.S. stock markets are set to open flat after the roller-coaster ride that followed the Fed’s decision on Wednesday. While the 75 basis point hike was the milder of the two outcomes seen as possible from the meeting, the dot-plot of policymakers’ expectations for rates indicated that the central bank isn’t done tightening yet, not by a long shot.

By 06:15 ET (10:15 GMT), Dow Jones futures were up 28 points or 0.1%, while S&P 500 futures were down less than 0.1%, and Nasdaq 100 futures were down by a fraction more.

Weekly jobless claims and U.S. current account data for the second quarter are due at 08:30 ET but are unlikely to have much effect while Fed Chair Jerome Powell’s hawkish guidance is still ringing in the market’s ears.

Accenture (NYSE:ACN), FactSet (NYSE:FDS) and Darden Restaurants (NYSE:DRI) are all due to report earnings before the open, while Costco (NASDAQ:COST) reports after the close.

4. Protests, emigration wave hits Russia after mobilization call

Over 1,000 people were arrested after a wave of protests across Russia to protest the mobilization of reservists to fight in Ukraine. Social media footage and flight booking sites indicated that men of fighting age sought to flee the country in droves, creating lines stretching back dozens of miles at Russia’s border with Finland, Georgia, and even Mongolia.

The written decree ordering mobilization made no reference to the exemptions and qualifications that President Vladimir Putin had made in his address to the nation, suggesting that the authorities will aim to raise much more than the 300,000 increase announced.

Meanwhile, in Ukraine, Russia fired a salvo of missiles at residential buildings and civilian infrastructure in the city of Zaporizhzhia, where it intends to stage a referendum on joining the Russian Federation at the weekend.

5. Oil stabilizes after dollar-led fall

Crude oil prices stabilized overnight after following other risk assets down in the wake of the Fed’s decision. In making the dollar more expensive, the Fed also made oil and any other commodity priced in dollars more expensive for the rest of the world, something that is increasingly weighing on analysts’ forecasts for demand.

By 06:30 ET, U.S. crude futures were up a modest 0.3% at $83.20, having bounced from support levels overnight without making a new low for the week. Brent crude was up 0.3% at $90.07 a barrel.

Prices had also come under pressure on Wednesday from the U.S. government reporting the biggest weekly build in gasoline inventories since July, suggesting that final demand from the U.S. economy is weakening a little faster than expected.