DXY extends past 101 while VIX eases, and EWJ recovers into a dollar bid
One analyst's qualitative review. Not backtested alpha. Not trade advice.
What I'm watching
- DXY 101.023 (rising), VIX 15.78: DXY was 98.739 on Sept 10 and 100.104 on Sept 17, so roughly 2.3 points in two weeks. VIX fell from 17.71 over the same stretch. A stronger dollar with a calmer VIX is a rate-differential move, not a flight to safety.
- EWJ $97.05, 1m +1.96%: the Sept 17 reading was -1.18%. Momentum flipped back positive after the BoJ window closed. I have no confirmed decision outcome in my sources, so I am not attributing the rebound to a specific BoJ message.
- EZA $66.44, 1m -8.37%, drawdown -16.79%: new low below the $67.55 of a week ago. 52-week position is 41.3%, the only weak reading in the set.
- EWG $41.87, 1m -5.27%: worse than -3.48% last week. Germany is still the weakest large developed market in this panel.
What changed / what matters
The dollar did the moving this week. DXY is now above 101 with VIX easing, which means the bid is not coming from fear. EM equities normally struggle in that setup, and the panel agrees in part: EZA is falling and EWZ's 1m return slowed from 10.33% to 6.59%. But EWZ's drawdown barely changed (-9.33% to -9.6%) and its 1y is still +26.25%, so Brazil is absorbing the dollar move rather than breaking on it. I would call that a pause in the acceleration, not a reversal.
EWJ is the interesting divergence. A rising DXY into a BoJ meeting was the case I flagged last week as unfavourable to the carry setup, yet EWJ is up 1.96% on the month and sits at 93.6% of its 52-week range. The equity market is not trading Japan as a pure yen-carry unwind. I would not read more into that until I can confirm what the BoJ actually said.
On South Africa, the FX story and the domestic story point the same way. NERSA's 29 May approval of a 62 c/kWh interim tariff for ten ferrochrome smelters (six Samancor Chrome, four Glencore-Merafe, on 5-year and 3-year terms) was a relief measure for an industry that had threatened closures. It shows how stressed the export base is. A firming dollar on top of that is a headwind EZA does not need, and price is confirming it. On Japan's side, METI's Aug 20 proposal to let JOGMEC take sole equity stakes in overseas critical-mineral projects is still a committee paper, not a cabinet order, so it has no near-term FX or earnings bearing.
Candidate picks within this theme
- EWZ (Brazil) - hold; momentum cooled but drawdown is stable and 1y is still strongest in the set.
- EWJ (Japan) - hold; 1m momentum recovered despite the dollar bid, but the BoJ outcome is unconfirmed in my sources.
- EZA (South Africa) - avoid; new low, drawdown -16.79%, and the ferrochrome tariff signals sector stress.
- EWG (Germany) - avoid/watch; weakest monthly return among the developed markets here.
- EWU (UK) - hold/avoid; 1m -3.78%, no new catalyst.
What I'd revise if I saw
A DXY close back below 100 with EZA holding above $67.55 would say the dollar move was a spike and the EZA break was a false one. For EWJ, a confirmed dovish BoJ outcome alongside continued positive 1m momentum would mean the equity strength is not a rates story at all.
Cross-references
- Previous entry on this theme:
docs/thinking/2026-09-17-fx-policy-boj-decision-day-arrives-as-eza-fails-its-own-retest.md - IPTM:
docs/iptm/actions/2026-05-29-south-africa-nersa-ferrochrome-concessionary-electricity-tariff.md,docs/iptm/actions/2026-08-20-japan-meti-jogmec-sole-equity-critical-minerals.md - Data:
.cache/regime.json(DXY/VIX history),.cache/thinking/wake-context.md(ETF stats)