Market Commentary: US Senate near to a deal to extend funding

The news and data flow during the session here was exceptionally limited. Reports are emerging that negotiators from both the US Senate Republican and Democrat parties are nearing an agreement on a short-term spending measure with the aim of keeping the government operational after October 1st. This measure is intended as a temporary solution for funding, spanning approximately 4 to 6 weeks. Apart from this development, there is no other noteworthy news to report at this time.

In terms of Japan, we observed some uninspiring verbal intervention remarks aimed at supporting the Japanese yen. Nevertheless, USD/JPY has hardly moved from its session high and remains within a narrow trading range, indicating that these comments have not significantly impacted the currency pair.

Regarding the People’s Bank of China, there was a remarkable disparity between the model-based estimate for setting the USD/CNY reference rate and the actual rate, as outlined in the bullets above.

Federal Reserve Bank of Minneapolis President Neel Kashkari expressed his stance favoring “one more Fed Funds rate hike this year.”

There are reports that US Senate negotiators are near a deal to keep govt open after Oct 1

  • According to Bloomberg, negotiators representing the opposing factions in the upper house of the United States government are approaching an agreement regarding a short-term spending plan to maintain government funding beyond October 1.
  • Both Democrats and Republicans are closing in on an accord to prevent a government shutdown.
  • This measure is designed as a temporary solution to secure funding for a duration of 4 to 6 weeks.
  • If this proposal successfully passes the Senate, it will then proceed to the House of Representatives, where an entirely new set of challenges and debates awaits.

Japanese Economic Minister Shindo says important for currencies to move in stable manner

  • Must carefully monitor whether output gap to remain in growth territory
  • Japan’s consumption turned to contraction due to inflation, seen unstable
  • Important for currencies to move in stable manner reflecting fundamentals
  • Won’t comment on forex levels
  • Weak yen has various effects on economy such as raising import costs for consumers, improving competitiveness of exporters

Japan’s Finance minister Suzuki says rapid FX moves are undesirable

  • Some verbal JPY intervention comments from Japan’s Finance Minister
  • Currency rates should be set by the market
  • Rapid FX moves undesirable
  • Closely watching FX moves with a great sense of urgency
  • Won’t rule out any steps to respond to disorderly FX moves
  • Share the view with international authorities that excessive FX volatility is undesirable

Fed’s Kashkari says if government shut down will do best we can with private data

  • In case of a government shut down that means we don’t have access to the usual data, we will supplement with the best private data that we have
  • you always have to do your best with the best data available, I’m confident we’ll be able to make decisions
  • that the yield curve is un-inverting is not necessarily bad news and it could be good news
  • US rates probably have to go a little bit higher, be held there for longer, to cool things off –
  • Falling inflation next year might justify backing off the federal funds rate to stop it from getting tighter
  • I am one of the FOMC policymakers who sees one more rate hike this year

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