The yen has strengthened rapidly, reaching levels beyond the effect of currency intervention. Markets are focused on whether the yen's downtrend has broken and a new shift in direction has begun.
The yen has recently strengthened rapidly, reaching the upper ¥152 range per dollar. The Bank of Japan conducted its largest-ever yen-buying intervention between late July and 26 August, purchasing approximately ¥15.0399 trillion, but the yen has since strengthened beyond the level reached through that intervention. Factors cited as supporting the yen include expectations of faster BOJ rate hikes, the possibility that the US will hold off on a rate hike in September, expectations of a change in GPIF's asset allocation, the unwinding of yen carry trades, and remarks by US Treasury Secretary Bessent expressing concern about yen weakness. None of these, however, is considered a decisive factor.
Speculative positioning is also being cited as a backdrop to the yen's strength, with CFTC net short yen positions and leveraged funds' net short positions both expanding. The unwinding of speculative positions may be influencing the market's search for downside levels in dollar/yen. There are also signs of a shift in supply and demand for Japanese government bonds, with overseas investors increasing their net purchases of JGBs while domestic investors simultaneously increase their net sales of foreign bonds.
Market participants are cautiously assessing whether the yen's strengthening trend can continue. While ¥152.09 and historical lows and key levels in the ¥160 range are once again drawing attention, the psychologically important ¥150 level has also returned as a key focus for the market. Views are increasingly emerging that dollar/yen could move sharply in either direction depending on upcoming US economic data.