USD/JPY plunged without intervention, and the yen’s gains expanded without a subsequent rebound. Reports indicate that the pair fell below the 120-day moving average, the break-even level for hedge funds’ short-yen positions, raising expectations of further stop-loss selling.
From 2 September, USD/JPY turned sharply lower, with the largest daily decline exceeding ¥2 at one point. Although there appeared to have been no intervention, the market showed signs of establishing a floor. Dollar-buying and yen-selling positions expanded in response to Warsh’s remarks, but subsequent market movements may have worked in favor of a stronger yen.
CFTC data on speculative positions show that hedge funds’ short-yen positions expanded sharply at the start of trading, and moved below their break-even level as ¥159.8 fell below the 120-day moving average. This is viewed as a factor prompting stop-loss selling of Warsh long positions.
Hedge funds also expanded their yen purchases during periods in the first half of 2025. Large-scale yen buying was observed even though the US-Japan interest-rate differential remained a backdrop for a stronger dollar and weaker yen. Some view the latest move as an extension of that trend.
There was a week in which Treasury Secretary Bessent said that he expected Japan to pursue policies that would strengthen the yen, and the policy direction of Japan and the United States may affect the stronger-yen scenario. Fiscal policy revisions and the outlook for prices and interest rates are likely to draw attention again.