Late night rush! Chinese assets explode! The Japanese yen was hit by air strikes, and a super storm is coming?

China’s assets are exploding! On the evening of May 2, U.S. stocks collectively opened higher.
As of the close, the three major indexes collectively closed up. The Nasdaq rose 1.51%. The S&P 500 rose 0.91%. The Dow Jones Industrial Average rose 0.85%.
The performance of Chinese concept stocks was particularly strong. The Nasdaq China Golden Dragon Index rose by more than 6%, setting a new closing high since the end of November last year. It also set the largest single-day increase since the end of July last year.
In addition, the Japanese yen has begun to depreciate at an accelerated pace recently.
May 2. The U.S. dollar fell below 154 against the Japanese yen during the day.
As of press time, the U.S. dollar was trading at 153.17 against the Japanese yen.
The Japanese yen exchange rate fell to 160 yen per US dollar on April 29, hitting a 34-year low.
Subsequently, the Japanese government intervened in the exchange rate by buying Japanese yen and selling US dollars. It cost 9 trillion yen twice.
Even so, the market\’s bearish sentiment on the yen remains high, because after two interventions, Japan\’s subsequent actions will be significantly limited.
Former Bank of Japan Governor Haruhiko Kuroda said on Thursday that he expected the yen\’s depreciation to be temporary. A weak yen would help boost corporate profits of Japanese multinational companies.
Chinese assets soared late at night. On the evening of May 2, U.S. stocks collectively opened higher.
As of the close, the three major indexes collectively closed up. The Nasdaq rose 1.51%. The S&P 500 rose 0.91%. The Dow Jones Industrial Average rose 0.85%.
Large technology stocks generally rose. Nvidia and Amazon rose by more than 3%. Netflix and Apple rose by more than 2%. Google rose by more than 1%. Microsoft, Meta, Intel, and Tesla rose slightly.
On the news, on May 2, the U.S. Department of Labor released data. The number of initial claims for unemployment benefits last week as of April 27 was 208,000. The estimate was 215,000. The initial value for the previous week was 207,000. The revised value was 208,000.
In addition, the U.S. Department of Commerce reported that the U.S. trade balance deficit in March was US$69.4 billion. The expected deficit was US$69.1 billion. The previous deficit was US$68.9 billion.
Among them, exports were US$257.6 billion. The previous value was US$263 billion; imports were US$327 billion. The previous value was US$331.9 billion.
Chinese concept stocks performed brilliantly. The Nasdaq China Golden Dragon Index rose by more than 6%, setting a new closing high since the end of November last year. It also set the largest single-day increase since the end of July last year.
Xpeng Motors and Bilibili rose by more than 15%. Beike rose by more than 12%. Kingsoft Cloud and JD.com rose by more than 11%. Gaotu and Li Auto rose by more than 10%. Weibo rose by more than 8%. Baidu and TAL rose by more than 11%. Over 7%. NIO and Alibaba rose over 6%.
It is worth mentioning that during the day on May 2, Hong Kong stocks had a good start in May.
On that day, the Hang Seng Index rose 2.50%. The Hang Seng Technology Index rose 4.45%.
Japan intervened in the exchange rate twice, costing 9 trillion yen. Japan’s actions in the foreign exchange market have attracted much attention in recent days.
Japan intervened in the foreign exchange market twice within a week. With the rapid rise in the yen exchange rate within a few minutes, it showed that Japanese officials had intervened. The market estimated the amount to be 9 trillion yen.
On April 29, the exchange rate of the Japanese yen against the U.S. dollar fell to 160 yen per U.S. dollar. This was the first time since 1990.
On the same day, the Japanese official intervened in the currency market for the first time. The Japanese yen exchange rate rose by 1.25% and closed at 156.34.
On May 1st, the Japanese yen exchange rate rose sharply again by 2.05%, closing at 154.56.
May 2. The Japanese yen exchange rate fell below 154 during the day.
As of press time, it was reported at 153.17.
According to Bank of Japan account data, Japan will conduct its second yen intervention on Thursday, May 2. The scale of intervention may be 3.5 trillion yen.
Previously, Japan may have intervened in the yen exchange rate on Monday (April 29). This was the first official Japanese intervention in the foreign exchange market since 2022. The scale of intervention was approximately 5.5 trillion yen.
The two total amounts are approximately 9 trillion yen.
After two rounds of suspected intervention this week, the Japanese authorities’ efforts to keep the yen strong have basically failed.
Currently, traders are preparing for a repeat of the Bank of Japan\’s intervention during the Golden Week holidays on May 3 and May 6.
Among them, May 6th will receive particularly close attention.
Because the London stock market will also be closed for the holiday. This may reduce liquidity in the market (liquidity tends to exaggerate exchange rate movements).
And if closely watched U.S. employment data on Friday boosts the dollar and further drags down the yen, Japanese authorities are also likely to take action.
Former Bank of Japan Governor Haruhiko Kuroda said on Thursday that he expected the yen\’s depreciation to be temporary. A weak yen would help boost corporate profits of Japanese multinational companies.
I think the depreciation of the yen is only temporary. But people may think differently.
If the depreciation of the yen is only temporary. In this case, the current Japanese stock price is to some extent artificially high due to the temporary depreciation of the yen. Haruhiko Kuroda said.
Kuroda\’s remarks came as Japanese policymakers are likely to intervene in currency markets twice this week to provide support for the yen after it fell to a 34-year low on Monday.
Haruhiko Kuroda said: I am confident that monetary policy will be normalized in a very cautious manner.
The market\’s bearish sentiment on the yen remains high. The yen has become a victim of the widening interest rate differential between Japan and the United States. Even speculation that the Japanese government will intervene to support the yen is not enough to completely calm the bearish sentiment.
The current interest rate gap between the United States and Japan is at a high of 3.7 percentage points. Foreign exchange intervention cannot reverse the huge interest rate gap. Unless there are clear signs that the Federal Reserve will begin an interest rate cut cycle.
Since the Japanese government intervened in September 2022, the yen has fallen by 8% against the US dollar. At that time, the interest rate difference between the United States and Japan was close to 3 percentage points.
At that time, when the Japanese Ministry of Finance intervened, the yen exchange rate remained near the 145.9 level. However, the yen has since depreciated again and exceeded this level.
In 2022, Japan intervened in the foreign exchange market three times in total (September 22, October 21 and October 24). The capital scale was 9 trillion yen.
JPMorgan Chase said that in theory, Japanese officials can use all foreign exchange reserves to intervene. But in practice, it is unlikely; in terms of frequency of intervention, Japan can only conduct three series of interventions within six months or at most. Otherwise, it may lose its status as a free-floating country.
The agency with the most accurate forecast for the yen said that although the Japanese authorities may work hard to curb the decline of the local currency, the yen may fall to 165 against the dollar.
Alvin Tan, head of Asian foreign exchange strategy at RBC Capital Markets, predicts that the yen may fall to its lowest level since 1986.
The main reason for the weakening of the yen is the huge interest rate differential between the United States and Japan. Even if the market has expectations for possible intervention by the Bank of Japan, it is not enough to completely calm the bearish sentiment.
Intervention will only be effective if it is coordinated by the United States, Tan said. Investors are likely to push USD/JPY higher this year, with the pair once again breaking through 160 and reaching around 165.
It is worth noting that this wave of rapid depreciation of the yen began on April 10.
At that time, during Japanese Prime Minister Fumio Kishida\’s visit to the United States, the leaders of the United States and Japan issued a joint statement stating that US-Japan strategic cooperation has ushered in a new era and that the international order based on the rule of law must be maintained.
After the meeting, Biden described it as the most important upgrade of the US-Japan alliance since its establishment.
As a result, the entire country of Japan is paying for Fumio Kishida’s high-profile visit to the United States.
In the past, Japanese exporters preferred a weaker yen. However, in the past two years, when the depreciation of the yen has increased significantly, Japanese exports have not been boosted as expected.
In addition to intervening in the exchange rate, Japan can also choose to raise interest rates.
Indonesia has already raised interest rates on April 24.
But for Japan, raising interest rates is still a difficult choice.
According to data, Japan\’s total debt will reach a record high of 1,286.45 trillion yen in 2023. Japan\’s national debt already accounts for about 260% of GDP.
Under such circumstances, raising interest rates will lead to a corresponding increase in the national debt tax in Japan\’s fiscal budget. This will put the Japanese government under greater financial pressure.
Editor: Luo Xiaoxia Proofreader: Zhao Yan