Fun with foreign exchange

Daily update

The yen has been gyrating amidst speculation about intervention in the markets and the possibility of more aggressive action by the Bank of Japan. A Japanese market holiday looms. Intervention only changes a currency’s value if there is a speculative attack to defeat (there is not) or if fundamentals change. Interest rates are a relevant fundamental, but one of many.
Reportedly, US Treasury Secretary Bessent supported the yen to prevent Japanese investors exiting the Treasury market. Meanwhile, the central bank of the Netherlands could be seen exiting the New York Federal Reserve with as much gold as it could carry. The Dutch moving roughly 86 metric tonnes of gold from the US and Canada to the UK and the Netherlands is highly unusual. The gold has not (net) been sold, and UK-held gold is still dollar denominated. Nonetheless, trust is an important but vulnerable characteristic of a reserve currency.
The Federal Reserve Beige Book of economic anecdotes was unchanged in its tone around growth (“moderate”) but signaled some consumers are becoming sensitive to price increases. The US affordability crisis hits consumers unevenly.
US July trade data is of some interest, as imports are a signal of how much AI spending is leaking out of the US economy.