Daily Briefing | 2026-09-21: Global tightening coupled with energy risks: China and the US turn to crisis management

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Today's main theme

The clearest common theme over the past 24 hours has been a further shift in global policy from "supporting growth" to "controlling risks". The Federal Reserve, the European Central Bank, and the Bank of Japan have all recently adopted a hawkish stance, with interest rates and exchange rates once again becoming core constraints on asset pricing. China maintained the LPR unchanged despite external interest rate differential pressures, while allowing the yuan to appreciate more rapidly, providing a more stable financial backdrop for the meeting between the Chinese and US leaders this week. Similar changes have occurred in technological competition: China and the United States have begun discussing AI national security incident notification mechanisms, extending the competition to crisis management; Meanwhile, traceable shipping in the Strait of Hormuz remains far below pre-war levels, and energy risks continue to influence monetary policy through inflation expectations. The market is no longer facing a single event, but a mutually reinforcing combination of interest rates, exchange rates, AI competition, and the energy supply chain.

Five key news items

1. Global interest rate hike expectations have resurfaced, causing the yen to fall to around 156 and triggering intervention warnings.

On September 21, during the Asian session, the yen was trading at approximately 156.64 against the US dollar, having fallen by about 2% over the past week. The Bank of Japan raised its policy interest rate to 1.25% last Friday, the highest in 31 years, but two committee members opposed the rate hike, and the lack of strong enough guidance to continue tightening after the meeting put pressure on the yen. Japanese media subsequently reported that authorities conducted an "exchange rate inquiry," a move typically seen by traders as a warning before actual foreign exchange intervention. Meanwhile, the Federal Reserve and the European Central Bank have also raised interest rates this month, and the Fed's hawkish signals pushed the dollar index up more than 1% last week, raising the probability of the market pricing in another rate hike in October to about 55%. This means that global funding costs are rising in tandem, and Japan's single interest rate hike is insufficient to offset the pressure on relative interest rate differentials. Going forward, attention should be paid to whether the Japanese Ministry of Finance has actually entered the market, the trend of US Treasury yields, and whether the Bank of Japan can establish a more credible expectation of continuous tightening.Reuters

2. China's LPR remained unchanged for the 16th consecutive month, with room for easing constrained by external interest rates and bank interest rate spreads.

China's loan prime rate remained unchanged in September: the 1-year LPR remained at 3.00%, and the 5-year LPR remained at 3.50%, marking the 16th consecutive month without adjustment. All 21 market participants surveyed by Reuters had previously expected nothing to change. The policy implication is not simply "no need for stimulus," but rather that central banks need to weigh down domestic demand, exchange rates, and the profits of financial institutions. Following the Federal Reserve's recent interest rate hikes, the spread between the yields on 10-year US and Chinese Treasury bonds is hovering near a record high, and further interest rate cuts may increase capital flows and exchange rate pressures. Banks' low net interest margins, coupled with contracting credit demand related to real estate and local governments, have weakened the effect of traditional interest rate cuts on credit expansion. Market institutions therefore believe that China has entered the latter stage of this round of interest rate cut cycles. The key questions going forward are whether domestic demand and the real estate market will weaken further in the fourth quarter, whether inflation can continue to rise, and whether the central bank will rely more on structural tools, liquidity injection, and fiscal synergy to support growth.Reuters

3. The yuan broke through 6.70 to a three-and-a-half-year high, with exchange rate constraints easing ahead of the meeting between the Chinese and US leaders.

On September 21, the onshore yuan rose to 6.6957 against the US dollar, its strongest level since January 2023; The offshore yuan is also around 6.695. The People's Bank of China set the central parity rate at 6.7487 that day. Although it was still weaker than market model estimates, the deviation between the central parity rate and market expectations narrowed significantly this month, indicating that the efforts to curb the rapid appreciation of the RMB over the past year are weakening. The timing is particularly noteworthy: U.S. Treasury Secretary Besant and Chinese Vice Premier He Lifeng have just concluded consultations in New York, and Trump and*are expected to discuss trade, AI, supply chains, and the situation in the Middle East this week. A moderate strengthening of the RMB can help reduce the controversy over "competitive devaluation" and also reduce import costs. However, the interest rate differential between China and the United States is still large, and the domestic fundamentals have not yet been fully reassessed. Therefore, it cannot be simply extrapolated to a long-term unilateral appreciation. Let's look at the summit outcomes, the daily central parity rate deviation, the foreign exchange settlement behavior of export companies, and the US dollar index.Reuters

4. The US and China have proposed an AI national security incident notification mechanism, adding a "crisis management" layer to technological competition.

U.S. Treasury Secretary Scott Bessent said after meeting with He Lifeng in New York on September 20 that the U.S. proposed establishing a China-U.S. AI security briefing mechanism with the goal of increasing transparency when AI-related incidents escalate to the national security level and promoting bilateral AI dialogue that had not been formally established before. The two sides also discussed finalizing the arrangements reached in May and exploring tariff reductions for some non-strategic goods; The current trade truce arrangement will expire on November 10. The fact that export controls on advanced AI chips and semiconductor equipment were not included in this mechanism discussion indicates that potential cooperation is closer to "preventing accidents from escalating" than to eliminating technological competition. If the mechanism is endorsed by the leaders of both countries, it could become a technological risk buffer similar to a crisis hotline, and future issues could involve critical infrastructure, cyberattacks, and AI weaponization. Going forward, attention should be paid to whether this week's summit will formally approve it, how the notification threshold will be defined, and whether export control and tariff negotiations can be advanced in parallel with the security dialogue.Reuters

5. Only 12 vessels were traceable to Hormuz over the weekend; energy transportation risks continue to support inflation premiums.

Surface shipping activity in the Strait of Hormuz remains at an extremely low level. Shipping data shows that only 12 trackable cargo ships passed through the strait over the past weekend, down from 35 the previous weekend; Before the outbreak of the US-Israel war with Iran on February 28, this waterway, which carries about one-fifth of the world's oil and liquefied natural gas transportation, typically saw about 125 large merchant ships pass through it daily. Actual oil flows did not collapse proportionally because some Middle Eastern oil tankers shut down their transponders, and Saudi Arabia's crude oil exports in September had recovered from a low of 2.4 million barrels per day in August to more than 4 million barrels per day. However, the Houthi attacks on Saudi Arabia's east-west oil pipeline have forced more crude oil to rely on the strait again, increasing logistics concentration. The risks therefore include not only spot shortages, but also insurance, freight, and premiums for tail supply disruptions. Going forward, we need to observe the opening of the Strait, alternative routes to Saudi Arabia, Brent oil prices, and progress in US-Iran diplomacy.Reuters

Market Correlation and Today's Observation

The most important thing to grasp today is that the four chains of "tightening - exchange rate - energy - technology valuation" are intersecting. On the interest rate side, the Federal Reserve, the European Central Bank, and the Bank of Japan have all been hawkish recently, and the global risk-free interest rate has shifted upward, increasing the valuation discount pressure on long-term growth assets. The yield on the 2-year U.S. Treasury note has risen 36 basis points to about 4.76% in the past two weeks. If expectations for another rate hike in October continue to strengthen, the dollar and U.S. Treasury yields may remain strong, and global risk appetite will rely more on earnings realization than liquidity expansion. On the exchange rate side, there was a clear divergence: the yen weakened even with interest rate hikes, indicating that relative interest rate spreads and policy credibility are more important than a single move; The RMB's rise above 6.70 is more like a combined result of changes in policy tolerance and expectations of stability before the summit, rather than a shift in domestic monetary policy.

On the commodity side, Brent crude oil fell by about 2% to around $101 per barrel during the Asian session, indicating that the recovery of actual oil flows could temporarily reduce the risk premium. However, the Hormuz navigation system remained highly abnormal, and the risk of tail supply had not disappeared. If energy prices rise again, it will strengthen the case for continued tightening by European and American central banks and squeeze corporate profits through transportation, chemical and aviation costs. On the technological side, the China-US AI notification mechanism means that the two countries have begun to try to set up guardrails for high-risk technology competition; Meanwhile, Chinese regulators are raising the review threshold for humanoid robot IPOs, focusing on whether the revenue from government-supported projects represents genuine business needs. Unitree rose more than fivefold after its listing before falling 55% from its peak, indicating that highly valued sectors are more sensitive to both interest rates and revenue quality.Reuters

Today, the order of observation can be placed on the yields of the US dollar and US Treasury bonds, whether Japan has shifted from verbal warnings to foreign exchange intervention, whether it can hold around 6.70 yuan, whether Brent oil prices have widened the geopolitical premium again, and whether there are new signals about tariffs, AI security, or supply chains before the meeting between the Chinese and US leaders. If energy risks ease and communication between China and the United States improves, risky assets may be given a breather. Conversely, rising oil prices, coupled with expectations of further global interest rate hikes, will directly increase valuation pressure on technology growth stocks, emerging market assets, and highly leveraged industries.

Cover image:Peter Beke / Unsplash