Summary
The Fed moved to cut rate rates by 50bp. The dollar did not decline steeply as speculative reports published before the event cushioned the blow, but it did continue to weaken. Meanwhile, BOJ Governor Kazuo Ueda's dovish press conference eased upward pressure on the yen. This was compounded by yen selling due to expectations that Sanae Takaichi would win the LDP presidential election, raising the prospect of a reversal in the short-term trend of a strong yen. However, short yen positions were abandoned after Shigeru Ishiba won the race. We expect the pace of US rate cuts will be gauged in October ahead of the presidential election. In particular, the dollar could weaken further if labor market data is weak as the market prices in a larger rate cut at the November FOMC meeting.
