Global Financial Shifts: Currency Trades, Market Rebounds, and Strategic Business Moves

1

Two weeks ago, the yen carry trade that caused significant market volatility is gradually making a comeback. Due to the Bank of Japans hawkish monetary policy and U.S. economic data, the yen has depreciated more than 5% against the dollar since August 5. Investors, particularly hedge funds, have begun borrowing yen again to invest in high-yield assets, leading to a significant increase in short positions against the yen. Although the market remains fragile, if the Bank of Japan maintains its current interest rates, carry trades could further attract investors. 

Analysis:

Impact on FX:The depreciation of the yen is likely to continue if the Bank of Japan maintains its interest rate stance.

FX Pair:USD/JPY

Impact on Shares:Potential increase in Japanese exporter stocks due to a weaker yen.

Companies:Japanese exporters, hedge funds.

2

After the largest sell-off in the U.S. stock market since the pandemic, quantitative funds are preparing to re-enter the market as it stabilizes. Over the past month, systematic funds that trade based on market signals and volatility have sold the largest amount of stocks in four years. But as market volatility decreases and signs emerge that the Fed may achieve a soft landing for the economy, these funds are expected to start buying stocks again. Additionally, commodity trading advisors and risk parity funds may also restore their equity positions once the market stabilizes, potentially driving further stock market gains.

Analysis:

Impact on FX:Potential strengthening of USD due to U.S. market recovery.

FX Pair:USD/JPY, USD/EUR

Impact on Shares:Positive for U.S. equities, particularly those sensitive to quantitative trading.

Companies:U.S. tech and growth stocks, quantitative funds.

3

The strong performance of the U.S. economy has led traders to lower their expectations for significant Fed rate cuts this year, causing U.S. Treasury yields to soar, particularly the policy-sensitive two-year yield. Although the market initially expected the Fed to cut rates significantly in September, better-than-expected retail sales and unemployment claims data have led traders to adjust their expectations, now forecasting less than 100 basis points of rate cuts in 2024. This economic resilience has also strengthened the dollar and triggered a ripple effect in the European bond market.

Analysis:

Impact on FX:Strengthening of USD due to revised interest rate expectations.

FX Pair:EUR/USD, GBP/USD

Impact on Shares:Potentially negative for bonds, but positive for U.S. financial stocks.

Companies:U.S. financial institutions, bond-sensitive sectors.

4

Typhoon Lan is approaching Japans Honshu Island, leading to the cancellation of around 90 international flights and 560 domestic flights, affecting over 120,000 passengers. Additionally, bullet train services between Tokyo and Nagoya have been suspended, and some highways may close. The Japan Meteorological Agency has issued warnings for strong winds and heavy rain, advising residents to beware of landslides, flooding, and rising river levels.

Analysis:

Impact on FX:Potential short-term strengthening of JPY due to risk-off sentiment.

FX Pair:USD/JPY

Impact on Shares:Negative impact on Japanese airlines, transport companies, and tourism-related stocks.

Companies:Japan Airlines, JR Central, East Japan Railway.

5

Singapores metal stockpiles have surged, partly due to global demand slowdown, leading to a significant influx of refined zinc and lead into the region. However, another important factor behind the stockpile surge is traders utilizing “rent sharing” agreements to lower costs, gaining additional profits by storing metals in high-cost warehouses in Singapore. While this strategy benefits traders, it poses financial risks to warehouse operators, who may struggle to recoup incentive payments if inventories are moved elsewhere. Despite these risks, Singapore remains a key hub for metal stockpiles due to its strategic location and mature trading network.

Analysis:

Impact on FX:Potential impact on SGD if metal trade dynamics shift.

FX Pair:USD/SGD

Impact on Shares:Mixed impact on metal trading companies and warehouse operators.

Companies:Singapore-based metal traders, logistics firms.

6

Trump‘s latest financial disclosure reveals that he earned $513 million from U.S. resorts and residential properties, including clubs like Doral, Mar-a-Lago, and Bedminster. He also disclosed tens of millions of dollars in debt due to legal issues. Trump’s portfolio is vast, including real estate, cryptocurrencies, and his social platform Truth Social. Additionally, he earned income from book sales and NFTs. Despite legal expenses, Trump continues to raise funds to support his presidential campaign, amassing about $635 million.

Analysis:

Impact on FX:Limited direct impact.

FX Pair:N/A

Impact on Shares:Potential positive sentiment for Trump-related enterprises, but overall market impact is likely limited.

Companies:Trump Organization, book publishers, digital asset platforms.

7

Singapore‘s non-oil domestic exports (NODX) increased by 15.7% year-on-year in July, ending five consecutive months of decline. This marks the first growth since January this year. Both imports and exports have risen, with total trade expanding by 13.7% last month. Exports to China have also climbed, driven by sales of specialized machinery, petrochemical products, and measuring instruments. This data has bolstered optimism about Singapore’s economic outlook, with the country confirming earlier this week that its trade-reliant economy is expected to grow by 2% to 3% this year, hitting the upper half of the initial forecast range of 1% to 3%, despite some remaining risks.

Analysis:

Impact on FX:Positive impact on SGD due to improved trade figures.

FX Pair:USD/SGD

Impact on Shares:Positive for Singaporean exporters, particularly in machinery and petrochemicals.

Companies:Singaporean trade companies, exporters.

8

Vice President Kamala Harris is set to propose an economic policy providing up to $25,000 in support for first-time homebuyers in response to voters' concerns about rising housing costs. Under the plan, first-time buyers who have paid rent on time for the past two years would be eligible for a “down payment support,” expected to benefit over a million homebuyers. This is an extension of President Biden‘s earlier $10,000 tax credit proposal. Harris’s plan also includes pushing for the construction of three million new housing units and restricting large real estate investors from using data companies to raise rent prices. Trump has criticized the plan, calling it “Venezuelan-style communism.”

Analysis:

Impact on FX:None.

FX Pair:N/A

Impact on Shares:Positive for real estate companies and homebuilders.

Companies:U.S. homebuilders, real estate investment firms.