The US dollar/yen exchange rate briefly plunged to the ¥152 range in September before rebounding to the ¥159 range. The move appears to have been driven by increased yen buying by speculative investors, including hedge funds, while the yen's depreciation paused after the Japan-US summit. Monetary policy in Japan and the US and the direction of pressure for a stronger yen are expected to be the focus in October.
The US dollar/yen exchange rate briefly plunged to the ¥152 range in September. The possibility that yen buying by speculative investors, including hedge funds, led the move has been cited, with the activity contributing to sharp market swings.
The yen subsequently weakened back to the ¥159 range, but the decline in the yen paused amid rate checks by Japanese and US monetary authorities and President Trump’s expression of concern about yen depreciation. Hedge fund yen-buying strategies have also been cited as a contributing factor.
There were periods of renewed dollar strength and yen weakness as the interest-rate differential widened following monetary policy announcements in Japan and the US, suggesting that hedge fund activity may have marked turning points in the yen market.
At the Japan-US summit on the 22nd, President Trump expressed concern about yen depreciation, while market views on the Takaichi administration’s reflationary policies were seen as factors that curtailed yen selling. In October, attention is expected to focus on the sustainability of pressure for a stronger yen, primarily in response to developments in the US.