Asia wrap: Bessent rocks the boat — Yen surges, Dollar slips, Fed cut drumbeat grows

Yen surges

Asian markets opened today like a party that ran out of champagne before midnight — the music still playing, but the dance floor thinning out. After three days of upbeat risk appetite, the MSCI Asia Pacific Index slipped 0.2%, dragged lower by a 1.4% slide in Japanese equities as the yen found fresh muscle. The spark came from U.S. Treasury Secretary Scott Bessent, who all but accused the Bank of Japan of dozing through its inflation fight and suggested rate hikes were coming. The yen jumped 0.5% against the dollar, sending Tokyo traders scrambling to unwind carry bets.

Bessent didn’t stop there — he lit a fire under the entire FX board. His call for the Fed to slash rates didn’t just tap the dollar lower; it shoved it down the stairs, weakening it against all G-10 peers. Coming on the heels of a benign U.S. inflation print that cemented a September quarter-point cut in traders’ minds, his suggestion that the Fed’s benchmark is at least 150bps too high sounded like the opening bid in a full-on easing cycle. He even dangled the prospect of a 50bps opener, a gift-wrapped invitation for equities to revisit record highs if that call comes to fruition.

In Tokyo, the BOJ is expected to sit on its hands at the Sept. 19 meeting, but Bessent’s comments have economists scrambling to pull forward hike forecasts — 42% now see an October move, one-third think January. In FX land, the message was clear: if Washington wants a weaker dollar, the yen could end up as one of the biggest winners.

Meanwhile, the White House is turning the Fed into a punching bag. Trump, never shy about rewriting the central bank’s playbook, hinted he might name Powell’s successor “a little bit early,” dangling a shortlist of three or four. The political pressure is palpable — Powell’s next cut might have more to do with the Oval Office than the Phillips curve.

Elsewhere, bitcoin cruised to fresh all-time highs, Shanghai shares notched a third straight gain, and Treasuries marked time. Traders are now eyeing Thursday’s U.S. PPI print, a key input to the Fed’s preferred inflation gauge, for confirmation that the dovish tide has more room to run. Layer in geopolitical nerves — Trump warning Putin of “very severe consequences” without a ceasefire — and the macro backdrop looks like a card table where too many players are bluffing at once, and the pot’s getting dangerously big.

China’s equity engine roars on liquidity highs, not headlines

The CSI 300 isn’t rallying on headlines — it’s running on octane straight from Beijing’s liquidity pumps. Mainland households, bloated with record savings and bored stiff by sinking deposit rates, are finally pulling their cash out of the mattress and into the stock market casino floor. Margin loans are piling up like chips at a high-roller table — now at levels we haven’t seen since 2015’s bubble binge — and turnover is humming for a third straight month as retail punters chase a breakout.

From April’s low, the benchmark has ripped 15% higher, shaking off months of sideways chop. And it’s not on the back of some grand stimulus bazooka or a shiny trade pact with Washington. Instead, Beijing’s surgical strikes — curbing cutthroat price wars and throttling overcapacity — have been enough to feed the animal spirits. Investors read it as deflation control, margin repair, and maybe even an earnings revival. The market’s telling us: the narrative doesn’t need to be pretty, just plausible.

The retail herd is stampeding hardest in the small-cap corral — that index just hit an eight-year high, its RSI locked above 70 for six straight sessions like it’s glued there. Local traders think the second half could see this flow accelerate as the Party’s five-year plan gets retail’s patriotic bid, helped by money growth at its fastest clip in over two years. Liquidity is the safety net — any profit-taking near the Shanghai Composite’s 3,700 ceiling will likely find a bid waiting underneath.

Still, some veterans will tell you this is a liquidity mirage — without a real earnings recovery or broad economic lift, it’s all smoke and mirrors. The sector tape is fractured, and the skeptics aren’t wrong that there’s no systemic improvement yet. But improving US trade vibes and a nod from big houses like Citi and Goldman have fattened the bull case, while local insurance funds lurk as patient buyers.

In other words, this isn’t the top of the mountain — it’s the rally’s halfway house. The liquidity tide’s still coming in, and the shoreline is moving further out. You don’t fight that in this market — you ride it until the pumps shut off.