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It was a good day to take risks, as high-yielding assets got a boost from strong U.S. equities performance last week and rumours about Shinzo Abe possibly calling for snap elections next month.

  • Japan’s markets out on Respect-for-the-Aged Day holiday
  • U.K. Rightmove house price index down by 1.2% vs. 0.9% dip in August
  • Australia’s new motor vehicle sales flat in August vs. 2.4% decline in July
  • Yen takes hits on snap election rumours

Major Events/Reports:

Snap elections in Japan?

Over the weekend reports from Japan’s state broadcaster and other media cited unnamed politicians from the ruling Liberal Democratic Party (LDP), saying that PM Shinzo Abe could call for snap elections as early as next month.

Abe is not obligated to hold an election for another year, but the recent North Korean tensions, cabinet reshuffling, and conflict among the opposition leaders make it favourable for the PM to call for one as soon as possible.

Sources say Abe could dissolve the lower house when it reconvenes on September 28. This could pave the way to an election in October when three other by-elections are scheduled on after Trump visits the country in mid-November.

An election favouring Abe and his policies means a longer period of Abenomics, which is generally bearish for the yen. Naturally, market players priced in accordingly.

Overall risk appetite

Risk-taking was the name of the game during the Asian forex trading session, as traders caught up to last Friday’s rallies in the U.S. equities.

Of course, it also didn’t hurt that there were no new developments regarding tensions in North Korea and that the FOMC statement – one of the most awaited events this week – is expected to end in a form of tightening from Yellen and her gang.

  • Nikkei is up by 0.52% to 19,909.50;
  • Australia’s A SX 200 is up by 0.51% to 5,723.90;
  • Shanghai index is up by 0.39% to 11,964.25, and
  • Hang Seng is up by 0.99% to 28,084.00.

Major Market Mover(s):

JPY

The low-yielding yen took a one-two punch from overall risk appetite and a the possibility of Shinzo Abe staying in power a bit longer to implement more yen-bearish policies.

USD/JPY started the week with a 25-pip gap before ending the session 7 pips higher (+0.06%) at 111.16, EUR/JPY gapped up by 12 pips before ending the session at 132.52 (+0.19%), and GBP/JPY gained 48 pips (+0.32%) on top of an 8-pip weekend gap.

Comdolls

Thanks to the overall risk-friendly environment, higher-yielding currencies like the comdolls had a field day against their lower-yielding counterparts.

AUD/USD is up by 30 pips (+0.38%) to .8029;
AUD/JPY is up by 39 pips (+0.44%) to 89.25;
USD/CAD is down by 10 pips (-0.08%) to 1.2183;
CAD/JPY is up by 15 pips (+0.17%) to 91.25;
NZD/USD is up by 42 pips (+0.58%) to .7322, and
NZD/JPY is u by 52 pips (+0.64%) to 81.39.

Watch Out For:

  • 8:00 am GMT: Italy’s trade balance (3.89B EUR expected, 4.50B EUR previous)
  • 9:00 am GMT: Euro Zone’s final CPI (y/y) to remain at 1.5%?
  • 10:00 am GMT: Germany’s Bundesbank monthly report
  • ECB Supervisor Ignazio Angeloni to join panel discussion in Rome
  • BOE’s Mark Carney to give lecture then discussion with IMF’s Lagarde in Washington