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With the Japanese yen on the move this week, there is a lot of focus and talk on the BOJ ahead of their next monetary policy decision next week.

Expectations for another rate hike are rising sharply before their meeting on 17-18 September, with markets now assigning a ~79% probability to a 25 bps rate hike. That is not all too much changed from the end of last week though, with the odds of that sitting at ~75%.

And yet, we are seeing the Japanese yen produce a strong rally this week in breaking key defensive lines in USD/JPY on the way down. The question now is, can the currency hold gains through the central bank decision and after?

BOJ policymakers set the tone

The governor of the Japanese central bank has already opened the door for a move…

The "cool things off" language is the most direct signal in this batch of comments, effectively confirming that below-trend growth is the RBA's intended outcome rather than an unwelcome side effect of its tightening path, which supports the case for further hikes without triggering the kind of market unease that comes with recession-risk language. Hunter's point that house price changes have only a small effect on consumer spending is worth flagging on its own, since it pushes back against the more standard wealth-effect narrative and suggests the RBA sees less risk of policy transmission stalling out through the housing channel than markets might otherwise assume. Combined with her explicit rejection of recession risk, the overall tone…

• RBA's Hunter flags deliberate cooling in housing and broader growth
• China exports match forecast in August, imports fall short as domestic demand stays soft
• Kospi surges past 7,130 on chips, Nikkei ekes out modest gain
• China August trade balance shows imports below expectations
• China's Rio Tinto ore purchasing halt appears set to take effect. AUD down.
• Vitol CEO sees China oil demand picking up, flags unsustainable gap
• ASX, AUD, NZD softer as NAB business conditions hit six-year low
• PBOC sets USD/ CNY central rate at 6.7804 (vs. estimate at 6.7104)
• Goldman Sachs turns more constructive on Indian equities: valuations, rupee resilience + more
• Japan GDP revision cements BOJ hike bets, yen and Nikkei in focus
• ICYMI: Goldman flags $120 oil risk, lifts…

The headline numbers land close to consensus but the details matter more than the surface read. Exports hitting the forecast exactly, while accelerating from July, confirms the export-led growth pattern that has defined China's year so far, with high-tech goods, cars and semiconductors doing the heavy lifting. The import miss, 28.2% against a 30% forecast, is the more interesting number: it suggests the pickup in domestic demand markets had been hoping for isn't quite materialising at the pace expected, even as it still represents a clear acceleration from July.

For AUD specifically, that's a mixed read, a miss on the import side is a softer signal for the commodity-demand channel than the strong headline trade surplus might suggest at…

The two markets are telling slightly different stories today. Kospi's rally is a straightforward risk-on move, with foreign and institutional investors buying simultaneously across large-cap chip, defense and holding company names, a combination that tends to signal broad conviction rather than a narrow rotation. The Nikkei's story is more about resilience than strength: a sharp bout of yen appreciation, which ties directly into the reinforced BOJ hike expectations following today's upwardly revised Q2 GDP and strong wage data, briefly knocked the index down around 270 yen before dip-buyers stepped back into AI and semiconductor names. That pattern, profit-taking and yen strength creating a dip that gets bought rather than extended,…

The story itself isn't new, Reuters first reported the directive on August 6, but its relevance sharpens now that September has arrived, the month CMRG specified as the effective start for the halted negotiations. Rio Tinto had been viewed as relatively insulated from CMRG's pressure campaign given Chinalco's stake in the miner and its role in the Simandou project, so an effective freeze targeting Rio specifically would mark an escalation beyond the earlier campaigns against BHP and Fortescue. For iron ore price action, the more instructive precedent is what happened during the BHP restrictions: rather than causing lasting disruption, that episode was resolved once BHP's incoming CEO engaged directly with Beijing, and the underlying…

• Trade balance $+119.09 bln (Reuters poll +$119.05Bn, prior +112.5bn)
• Dollar-denominated exports +25% y/y (Reuters poll +25.0% y/y, prior +23.9%)
• Dollar-denominated imports +28.2% y/y (Reuters poll +30.0% y/y, prior +27.5%)

Background:

• Preview: China trade data due today, a beat could firm up AUD as a demand proxy trade

I'll have more to come on this separately, detail etc. 

Hardy's comments carry weight given Vitol's position as one of the world's largest independent oil traders with a direct line into physical flows, and the China demand call is arguably the most market-relevant point: framing the current 5-6 million barrel a day gap between 2025 and 2026 Chinese crude imports as unsustainable implies Vitol expects Chinese buying to accelerate from here, a bullish signal for crude demand even as Hardy simultaneously flags a 1.5 million barrel a day contraction in global demand for the year. The Bab el-Mandeb and Hormuz figures matter for the supply side of the ledger, quantifying just how much Middle East flow remains exposed to the ongoing conflict, roughly 10 million barrels a day of oil and products…

The NAB survey is the most important release of this batch, and the profitability collapse is the number worth watching most closely given the survey's own note that it tends to lead broader labour market conditions, a signal that would matter more to the RBA than the confidence or conditions headline reads on their own. That creates some tension in the AUD story: cost pressures and elevated inflation are still pushing swap pricing toward a fourth RBA hike this month, currently near 69%, even as the underlying business survey points to slowing growth and margin compression that would normally argue for caution.

The ASX's slide below 9,000 and the sharp drop in consumer sentiment reinforce that same theme of a domestic economy losing…

Goldman's shift in tone matters more for positioning than for any single data point in the note, framing India as having absorbed its worst external shocks of the year, capital outflows, rupee weakness and an Iran-driven oil spike, without the domestic fundamentals cracking. A decade-low forward P/E of around 20x gives the bank a valuation argument to lean on alongside the macro one, while the AI-trade diversification angle positions India as a way to gain AI-adjacent exposure without the concentration risk of the dominant US and Northeast Asian names. The currency stabilization piece is worth watching separately: a Reserve Bank of India that has shown it can defend the rupee through targeted swap lines reduces one of the bigger tail…

The PBOC allows the yuan to fluctuate within a +/- 2% range, around this reference rate. More here on this.

• PBoC inject 1 bn yuan via 7-day reverse repos in Open Marekt Operations. Rate unchanged at 1.4%
• 5bn mature today
• net 4bn drain

With a second 25bp hike already fully priced in, MUFG expects the euro and euro-zone rates to trade off the ECB's guidance rather than the decision itself, leaving Lagarde's press conference as the real event risk this week. The bar for a hawkish surprise has risen sharply after the summer repricing, which now has markets expecting roughly 75bps of further tightening by mid-2026, so MUFG sees the greater risk skewed toward disappointment if Lagarde does not clearly endorse another hike before year end, a scenario that could weigh modestly on EUR.

Near-term EUR/USD direction is still likely to be driven more by developments on the dollar side, with MUFG's short-term fundamentals pointing to a level closer to the lower end of the recent…