Analysts at HSBC note that early in the September month, geopolitical tensions between the US and North Korea caused the JPY to rally and on 4 September, the JPY rallied almost 1% following the news on the weekend of 2/3 September that North Korea had tested a hydrogen bomb.
“These tensions helped put USD-JPY under pressure to hit a 10-month low 107.32 on 8 September. The pressure on USD-JPY lessened after North Korea refrained from a missile launch on their Founding Day. This geopolitical story subsided from this point as the JPY would be dominated by domestic politics and the Fed.”
“On 21 September, the BoJ decided to leave policy unchanged, and as has been the tendency of recent BoJ meetings, it seemed to pass the FX market by without much movement in the JPY. More importantly on the domestic front, reports began to emerge in the middle of the month that Prime Minister Abe was considering calling a snap election for as early as October. Speculation continued to grow until Abe formally announced on 25 September that he would dissolve the lower house of parliament on 28 September and hold a snap election on 22 October. So USD-JPY hit a low at the beginning of the month based on geopolitical tensions. But its own politics coupled with a hawkish Fed saw the JPY weaken and give back all of its gains and more. In G10 the JPY was side-by-side the worst performer against the USD with the SEK and the NOK.”
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