The stunning recovery of the Japanese yen is disrupting global markets, causing assets such as Japanese stocks, gold, and Bitcoin to suffer heavy losses. Investors are re-evaluating their leveraged bets. In terms of product structure, the operating income of 10-30 billion yuan products was 401/1288/60 million yuan respectively, and the overall sales volume of the company was 18,000 kiloliters in 2023, an increase of +28.10% year-on-year, showing significant growth.

On Thursday, the yen/dollar rose to its highest level in more than two months, reflecting the increasing bet in the market that the US-Japan interest rate differential may narrow. During the US trading session, the yen's gains were somewhat narrowed, possibly due to long positions taking profit and the US dollar getting support from better-than-expected US economic growth reports.

The strong yen is hurting Japanese exporters and prompting the Nikkei 225 index to enter a technical correction. The strong yen is also hitting other currencies, such as the Australian dollar, and causing losses in gold and Bitcoin, as arbitrage trading is no longer popular and traders seem to be selling previously popular yen short positions.

Kyle Rodda, senior market analyst at Capital.com, said:

"This is actually a deleveraging event triggered by short yen positions and is forcing a widespread liquidation in the market."

The recent strength of the yen has become an additional source of volatility for global assets, which have been shaken by the waning enthusiasm for the artificial intelligence craze that drove Wall Street this year. Since hitting multi-year lows at the beginning of this month, the yen/dollar exchange rate has risen by nearly 5%. However, this momentum will be tested next week with the release of new US data and meetings of both the Bank of Japan and the Federal Reserve.

The reason behind the rebound of the yen is the huge withdrawal of speculative trading worldwide, which uses low-yielding currencies such as the yen to provide funds for investments in high-yielding currencies such as the Mexican peso or the Australian and New Zealand dollars. The constant increase in expectations for the Federal Reserve to ease policy as early as September is also a key driving factor for the rebound of the yen.

Valentin Marinov, G-10 currency strategist at French agricultural credit bank, said that although the recent rise in the yen reflects the unwinding of such speculative trading, second-quarter US GDP data released on Thursday showed the US economy is growing faster than expected, "which may enhance the attractiveness of high-yield and safe-haven US dollars and help them outperform the market as a whole."

Traders are also watching the Bank of Japan's interest rate meeting next Wednesday. The forward market predicts a 70% chance that the Bank of Japan will raise interest rates at this meeting, up from 44% earlier this week.

"The unwinding of short yen positions is undoubtedly exacerbating global risk aversion," wrote ING strategists Chris Turner and others in a report on Thursday. "There is definitely more unwinding to come, and data or events in the coming days will bring further downside risks to the USD/JPY rate."

Calvin Yeoh, managing partner of the Merlion fund at Blue Edge Advisors, said:

"Although the temperature is high in the summer, liquidity is low. If the yen continues to soar, it will further cause cross-asset liquidation, which will increase volatility and may trigger risk control alerts for some funds and force them to liquidate their positions."

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