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Currency markets focused on the yen on Monday following a sharp drop last week that spurred speculation of a rate check from Tokyo, while investors pondered interest-rate outlooks after a wave of hikes from major central banks last week.

The yen was a touch firmer at 156.64 per US dollar after dropping 2% last week. Japan markets were closed for a three-day holiday, leading to low liquidity while keeping traders on alert for an official intervention to prop up the volatile currency.

The Bank of Japan raised rates on Friday to their highest level in 31 years to 1.25%, yet the widely expected move did not boost the yen as two dissenting votes and a lack of explicitly hawkish guidance disappointed investors.

That led to the yen sharply declining before the Nikkei newspaper reported that Japanese officials conducted rate checks. A rate check involves authorities asking banks for currency quotes to gauge market conditions, which traders view as a precursor to currency intervention.

Apart from the BOJ, the Federal Reserve and the European Central Bank raised rates this month, with both warning further tightening might be needed to tackle inflation due to the almost seven-month-long war in the Middle East.

Fred Neumann, chief Asia economist at HSBC, said the BOJ’s messaging has become all the harder because the Fed delivered a hawkish signal with its unanimous decision to raise its policy rate.
The yen had firmed to its strongest level in seven months in early September as traders wagered on a faster pace of BOJ hikes and early signs of repatriation by Japanese investors but has since surrendered some of those gains.”The bar thus remains high for the BOJ to convince markets of its hawkish tilt and anchor expectations when it comes to the yen,” Neumann said. “In the coming weeks and months, investors may again test the resolve of the BOJ to push rates higher and match the Fed’s tightening.”

The euro was little changed at $1.1482 after voting projections showed the far-right Alternative for Germany (AfD) took first place in state elections in northeastern Germany, in a blow to Chancellor Friedrich Merz’s conservative party.

ING economists said the results clearly echo the low popularity of the entire federal government, and of Chancellor Friedrich Merz in particular.

“Years of economic stagnation helped produce that fragmentation. Now the fragmentation will make the stagnation harder to escape,” they said in a note.

The dollar index, which tracks the US currency against six major peers, was steady at 100.23 after gaining more than 1% last week following the Fed’s rate hike, as the central bank signalled more increases could be coming.

Traders are currently pricing in a 55% chance of a rate hike at the Fed’s next meeting in October, up from 42.5% a week earlier, the CME FedWatch tool showed.

“We do not think that the midterm elections are going to be a limiting factor in the Fed delivering another hike in October,” said Thomas Simons, chief US economist at Jefferies.

“Whether there is another hike in December will come down to the data and geopolitical developments. Looking to 2027, the path of rates will come down to what happens with the labor market. We would say rate cuts are likely in second half of 2027.”

In other currencies, sterling last bought $1.339 in early trading. The Australian dollar fetched $0.7129, while the New Zealand dollar was at $0.5721.

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Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha’s Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Seven mainboard and 13 SME initial public offerings (IPOs) are scheduled to open for subscription between September 21 and 25, extending the momentum in the primary market fundraising. The 20 issues have a combined issue size of around ₹4,152 crore.

This follows five mainboard and six SME IPOs that opened for subscription last week, with a combined issue size of around ₹24,563 crore. NSE’s ₹22,561-crore IPO-the largest this year-is set to close on Monday. The issue has been fully subscribed. Among the mainboard issues this week, Elevate Campuses’ ₹2,100 crore IPO will be the largest. All the other issue sizes are below ₹1,000 crore.

Read more: JioBlackRock CIO Rishi Kohli decodes Nifty’s inflection point after two years of weak returns

Listings

The week will also see six mainboard and eight SME companies that launched their IPOs last week list on the exchanges.
Among the mainboard companies, Manika Plastech will list on September 21, while SS Retail, Hero Motors and Jindal Supreme India will list on September 23. NSE and Sonaselection India will list on September 24.

Read more: Will Nifty extend gains to 4th session on Monday? US sanctions on Russia among factors to decide D-Street action
Among SME companies, Injecto Polymers and Century Business Media will list on September 21. Vama Wovenfab, Shakti Polytarp and Quanto Agroworld will list on September 22, followed by SpectrA Technology Solutions and Kheria Autocomp on September 24 and Axiom Gas Engineering on September 25.