President Trump also caught the markets by surprise, announcing plans to force firms to pay an annual fee of $100,000 per H-1B visa for high-skilled workers. The new visa rule could impact the tech sector, which is reliant on talent from China and India. A $100,000 annual visa payment for skilled foreign workers could raise operating costs and squeeze margins, potentially pressuring share prices.
Trump made the visa announcement after Friday’s reportedly positive call with Chinese President Xi Jinping. The move could escalate tensions between the US and China ahead of the expiration of the 90-day tariff truce. A full-blown trade war could heavily impact market sentiment and US stock futures.
USD/JPY Rises, Offering Market Comfort
While the PBoC and US foreign policy weighed on sentiment, a weaker Japanese yen, cushioned the downside for US stock futures. USD/JPY rose 0.26% to 148.339 in morning trading on Monday, September 22. The pair continued to recover from last week’s 145.481 low. The softer yen fueled demand for Japanese stocks, sending the Nikkei 225 up 1.55%.
Why do US stock futures traders need to watch the USD/JPY pair and the Nikkei 225?
A sharp drop in the USD/JPY pair and Nikkei 225 could signal rising risk of a yen carry trade unwind. On Friday, the Bank of Japan maintained interest rates at 0.5%. However, two policymakers dissented from the interest rate decision, fueling speculation about an October rate hike. BoJ rate hikes. A hawkish BoJ, combined with Fed rate cuts in the fourth quarter, could fuel demand for the yen.
A falling USD/JPY could trigger margin calls, forcing investors to unwind leveraged US stock investments to repay cheap Japanese debt (yen carry trade unwind). In 2024, the Nasdaq Composite Index plunged 11% in three trading sessions after the BoJ unexpectedly raised interest rates and cut Japanese Government Bond (JGB) purchases. The BoJ’s July 2024 interest rate decision, coinciding with dovish Fed policy bets, sent the USD/JPY crashing from 152.748 (July 31) to 141.684 (August 5).