A slippage in US tech stocks could weigh on the USD, with the NASDAQ index having broken below its 100dma this week. Following a sell-off in SaaS stocks on fears of AI displacement, a US megacap has also fallen in post-market trading due to concerns over its accelerating AI spend. Uncertainty in US equities are likely restraining the DXY index at mid-97 levels, despite both US Manufacturing and Service ISM indices beating expectations this week.
JPY has softened as markets anticipate a possible landslide victory for the LDP under PM Takaichi, with USD/JPY rebounding back towards 157. Strong election results for the LDP could be seen as a mandate for Takaichi to embark on her plans for the state to raise investment and bolster growth, which could entail greater fiscal strain and a weaker JPY. Markets may also see a lower chance of intervention to support the JPY once elections are over this weekend, as Takaichi has said that the weak JPY has both “pros and cons”.
USD/KRW has rebounded to the 1460 level, with KRW sentiment hit by a weaker JPY, and media reports that the US have drafted a notice to impose a 25% tariff at some point, based on its assessment of the pace of investment implementation. The Korean authorities have made clear their discomfort over KRW weakness and are taking steps to mitigate it. The NPS said that it will suspend portfolio rebalancing for 1H26 (that could lead to a trimming of domestic stocks) and reduce allocation to foreign equities, though NPS’s CEO Kim said that it would be appropriate to return to a fully unhedged FX stance once Korea’s FX conditions stabilize. Korea also announced plans for the NPS to issue FX bonds by the end of 2026, which should reduce the need to sell KRW for foreign asset purchases. Today, the Ministry of Health and Welfare, the NPS, the Ministry of Finance, and the BoK will hold the first formal quadrilateral consultation meeting addressing financial market stability issues. This could yield further policy measures to rein in the KRW’s large misalignment relative to fundamentals.
Quote of the Day
"There is no logical way to the discovery of these elemental laws. There is only the way of intuition, which is helped by a feeling for the order lying behind the appearance.”
Albert Einstein
February 5 in history
The first electric portable typewriter went on sale in New York in 1957.
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