The significant strengthening of the Japanese yen prompted a reaction in the global forex market, causing the US dollar to fall to its lowest level in nearly two months. The Bloomberg US dollar spot index continued to decline on Thursday, falling as much as 0.4% to its lowest level since the end of May on Wednesday. On Thursday morning, the exchange rate of the Japanese yen against the US dollar broke through 156 in the Tokyo market, and people have been speculating that the Japanese authorities may intervene in the foreign exchange market again to support the yen.

Since last Thursday, the Japanese yen has soared by about 4%. It is believed that Japan unexpectedly entered the foreign exchange market to support the Japanese yen at that time. The next day, the Japanese yen received another boost from a suspected intervention. Recently, a well-known Japanese minister called on the Bank of Japan to raise interest rates to boost the yen, while former US President Donald Trump also tended to depreciate the dollar, which exacerbated the volatility of the foreign exchange market.

Valentin Marinov, head of foreign exchange strategy at French Agricultural Credit Group's G10, said that the trend of the US dollar against the Japanese yen seems to be sending shock waves to other US dollar cross-rates.

Kono Taro, who has long been committed to becoming Japan's prime minister, emphasized this week the problem brought about by the sharp depreciation of the yen against the US dollar, including the inflationary impact on domestic prices. Kono Taro said that although the depreciation of the yen helps boost exports, the current benefits for Japan are limited because many Japanese companies have production facilities overseas.

Meanwhile, in an interview, Trump said that the strength of the dollar has undermined the competitiveness of US exports, raising concerns that if he wins the US election this year, he may take action to weaken the dollar.

Other market participants have pointed out that investors will profit-taking before the Bank of Japan and the Federal Reserve announce policy decisions later this month. Since the end of June, the US dollar has been weakening, as traders bet that the recent rally of the US dollar was excessive.

As of the time of writing, the exchange rate of the Japanese yen against the US dollar has risen by about 0.3% to 155.70 yen against 1 US dollar.

"Before the central bank meeting, some hot money seemed to be closing out bets on the G10 currencies of the past two months," Roberto Cobo Garcia, head of G10 foreign exchange strategy at Banco Bilbao Vizcaya Argentaria, said.

Editor/ping