Brent crude drops 6% to $82 after Trump calls for Iran talks. Yen jumps 1% after coordinated US-Japan intervention. Asian stocks mixed, with Nikkei and KOSPI lower.
Oil prices fell sharply on Monday, with Brent crude dropping more than 6% to $82.41 a barrel. President Donald Trump said talks with Iran would start later in the day, covering the reopening of the Strait of Hormuz and the impasse over Tehran's nuclear capabilities. Trump had called off an imminent attack on Iran to pursue the deal.
Stock markets were mixed. S&P 500 futures rose 0.4% and Nasdaq futures gained 0.6%. Japan's Nikkei dipped 1%. South Korea's KOSPI slid 3.6% after a turbulent July in which it lost 22%. MSCI's broadest index of Asia-Pacific shares outside Japan was down 1% in early trading.
The yen rose more than 1% to 155.39 per dollar in a sudden move that put traders on alert for further intervention. Japan's finance ministry confirmed that the U.S. and Japan had conducted coordinated yen-buying operations and would not hesitate to take additional action. The statement marked a rare bilateral effort to halt the yen's slide to 40-year lows.
Mizuho Bank strategist Masayuki Nakajima said the objective was likely not to reverse the broader trend of yen weakness. “It is difficult to argue that the secular depreciation trend in the yen has fundamentally changed. In the near term, however, the momentum may shift in favour of yen appreciation, as the tone of recent U.S.-Japan communication carries a pointed warning to speculative traders,” Nakajima said.
Trump said on Sunday the U.S. was helping Japan prop up the yen as a sign of friendship and to support the world economy. “They have a weakening yen, and they wanted a little bit of help. And we're always there for Japan,” Trump said.
Nick Twidale, chief market strategist at ATFX Global, said Trump's framing of the intervention as a 'friendship trade' undermines the credibility of U.S. participation. “They are pushing against the fundamentals so I expect the market to eventually correct the move once the intervention has finished, unless we do see a change in the underlying factors,” Twidale said.
Traders are now watching for any further steps from Tokyo or Washington as the yen continues to trade near levels that previously drew official action. The next catalyst for the pair will be the Bank of Japan's policy meeting later this month.
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