The Gambler

The USD/JPY downside remains favored because policy divergence is narrowing and the risks around next week’s Fed and BOJ decisions are skewed toward a stronger yen.

• The US dollar weakened as KRW and JPY gained, while Brent crude reached $100 a barrel and markets priced roughly a 60% probability of a September Fed hike.
• USD/JPY held above its multi-month low of 152.89, with support near 152.00 and resistance at 155.00; possible repatriation flows from Japan’s GPIF may be supporting the yen.
• Four Fed-BOJ scenarios are presented: a Fed hold with a 25 or 50 basis-point BOJ hike would push USD/JPY lower, while simultaneous 25-basis-point hikes could trigger a rebound; a 50-basis-point BOJ hike could produce a sharper yen rally.
• China’s August headline CPI rose to 0.8% year over year from 0.5% in July, while core CPI reached 1.0% and PPI 3.8%; the gap suggests weak pricing power and domestic demand, supporting further CNH appreciation.
• Chile held its policy rate at 4.50% for a sixth consecutive meeting, while Poland was expected to keep rates at 3.75%; positive real rates and favorable external balances continue to support the Polish zloty.

Takeaway: Investors should retain a bias toward yen and yuan appreciation, while monitoring the Fed and BOJ decisions as the main catalysts; USD/CLP also appears too high relative to copper prices, but the note offers less immediate conviction on the Chilean peso.