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Just a week ago, did Japanese authorities intervene in the foreign exchange market again?

On Wednesday, the yen appreciated by 1.4% against the US dollar, reaching its highest level since June 12th. The US dollar's weakness intensified, with the US dollar index falling nearly 0.5% during the day, to its lowest level since late March, after touching a seven-month high at the end of June, the US dollar has fallen nearly 2%.

The market speculated that Japanese authorities might intervene again to buy yen. After intervening in the foreign exchange market with a record amount of funds a few months ago, the Bank of Japan last week injected 3.5 trillion yen (about 22 billion US dollars) to support the yen.

In the past 12 months, the yen has depreciated about 11% against the US dollar, falling to its lowest level since the 1980s, and has become the worst-performing currency in the G10 group. Even though the Bank of Japan raised interest rates for the first time since 2007 in March, yen bears still dominate the market.

Mitsubishi UFJ Bank's senior currency analyst Lee Hardman said that the yen's rise this round is "mainly driven by the liquidation of yen short positions". In addition, the Japanese digital minister previously said that the central bank needs to continue to raise interest rates to boost the yen, and former US President Trump said that the yen is too cheap, such statements may also be the reason for the rise of the yen.

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However, Wall Street generally predicts that the Bank of Japan will not continue to raise interest rates in July, and the Federal Reserve is also unlikely to lower interest rates, at that time, the yen will be under pressure, so Japanese authorities must find ways to support the yen before the interest rate decisions of the US and Japanese central banks.

G10 currency analyst Roberto Cobo Garcia said:

We see some capital flows indicating that institutional investors may take profits before the Bank of Japan and the Federal Reserve FOMC meetings.

For several months, hot money has been shorting the yen, which seems to be a short squeeze.

Trump recently pointed out in a media interview that the yen is too cheap. The outside world believes that if Trump wins the US election this year, he may introduce policies to weaken the US dollar to stimulate economic growth.Valentin Marinov, Head of G-10 Currency Strategy at Crédit Agricole, noted that significant fluctuations in the US dollar and Japanese yen appear to be impacting other currencies.

On Wednesday, the British pound broke through 1.30 against the US dollar, reaching its highest level in a year. Earlier data showed that UK inflation remains high, cooling expectations for interest rate cuts, which further bolstered the pound's trajectory.

The euro reached as high as 1.0945 against the US dollar, its highest level since March.