As the U.S. long-term Treasury yield exceeds 5% and the strong dollar market continues with the yen approaching 150 yen per dollar, China has begun investigating hedge funds' short selling, and the Korean stock market has fallen, shaking the exchange rate market.
With the U.S. Federal Reserve's freeze on interest rates, there was talk of a "further increase" and the yield on 10-year Treasury bonds peaked at 4.4980% on the 21st, hitting the highest level since 2007.
The 2-year yield on U.S. Treasury bonds hit 5.202%, breaking the highest since 2006.
Reuters reported on the 21st that the size of China's quantitative analysis funds doubled from the previous year to 1.08 trillion yuan (200 trillion won) as of the end of 2021, and that financial authorities have begun investigating short selling in hedge funds.
Total U.S. national debt topped $33 trillion for the first time on the Treasury's balance sheet on Thursday, and the congressional fight over federal spending, compounded by debt interest amid the Federal Reserve's 5% interest rate stance, raises the prospect of a federal government shutdown in September. In addition, it clearly shows the unstable financial trajectory of the United States.
As strong employment indicators emerge and the outlook for a prolonged interest rate hike becomes more prevalent, long-term interest rates in the United States have risen to the highest level, and the Korean government and the Bank of Korea have maintained a 2% interest rate gap between Korea and the United States, showing frustration in economic stimulus that relied on expectations of a U.S. interest rate cut. .
With the U.S. Congress unable to pass the necessary budget bill, the technology-focused Nasdaq Composite Index closed at 13,223.99, down 245.14 points on the 21st.
On the New York stock market, the Dow Jones Industrial Average (30 types) closed at $34,070.42, down $370.46 from the previous day, falling for three consecutive business days.
The Japanese yen was weakest near 148.465 yen per dollar, the lowest in more than 10 months in the previous session.
The Bank of Japan (BOJ) is scheduled to announce its interest rate decision this afternoon (the 22nd) after a two-day policy meeting, but Yomiuri said, “The BOJ is expected to stick to its ultra-loose monetary setting,” adding that the policy of weakening the yen due to low interest rates is expected to be avoided. It shows continuity.
“We are confident (BOJ) can achieve its 2% (inflation) target, but the focus will be on net (spring wage) negotiations starting next year,” said Daniel Hurley, portfolio specialist for emerging markets and Japanese equity strategies at T. Rowe Price. “I believe there will be no change until 2024,” he told Reuters on the 21st.
In a House deal, Republicans and Democrats would suspend federal spending by 2025 by suspending the debt limit for a year, freezing some funds expected to grow next year, and then limiting spending to 1% growth over five years. It ended with a bipartisan agreement to suspend the reduction to 4 trillion won.
Due to the strong dollar, the euro fell 0.07% today to $1.0655, falling to a one-month low in the last session.
The pound was trading at $1.2293, down 0.02%, and fell to about a one-month low on the 20th after the Bank of England (BoE) announced a halt to long-term interest rate increases, a day after Britain's rapid price rise unexpectedly slowed.
The pound's fall was further strengthened by the BoE not raising borrowing costs for the first time since 2021 and traders' expectations of further interest rate hikes from the central bank.
The Australian dollar fell 0.1% to $0.6410, with a weekly decline of about 0.3%, reversing last week's gains.
The New Zealand dollar fell 0.06% to $0.5928, but the weekly gain was 0.5%.
Reuters reported on the 21st that China began investigating hedge funds and securities firms for ‘short selling’ and ‘quantitative analysis’ investments.
Citing a source, Reuters reported that China's Securities Regulatory Commission (SCRC) has investigated short selling and quantitative trading of several major brokerages over the past few weeks, adding, "This is an advanced trading technique using derivatives and data-based computer models. “It appears to be an investigation into whether there is a relationship between the recent decline in the Chinese stock market and quant funds.”
Daniela Hathorn, senior market analyst at Capital.com, said: “With inflation seemingly falling but still very high and growth almost flat, the bank is not taking a decisive hawkish stance and is offering the possibility of an increase. “Unless we guarantee more, the market will realize that any decision will fall short of what is needed,” he said, explaining the strong dollar market on the possibility of a rate hike.
Reuters reported on the 21st, citing sources, that the China Securities Regulatory Commission requested information on hedge funds' Direct Order Line (DMA) during its investigation.
In stock trading, DMA is faster than regular orders because trading orders are sent directly to the exchange without going through the processing of a securities company, so hedge funds that use it have a correspondingly greater impact on the Chinese stock market.
Chinese hedge funds dominate leveraged investments by using borrowed funds by easily borrowing funds from securities companies through DMA. They only need to hold 25 cents, or one quarter, in the account for each dollar loaned.
The Chinese stock market showed improvement in real economic indicators in August, but foreign selling continued and the stock market fell, and the Shenzhen Component Index fell below the 10,000 mark at the closing price for the first time in about three and a half years since April 1, 2020. .