Trump hints that Japan manipulates exchange rates

Data from the U.S. Commodity Futures Trading Commission (CFTC) show that as of March 4, the net purchase of yen against the U.S. dollar by non-commercial sectors (speculative funds) such as hedge funds reached 133,651 lots (about 1.67 trillion yen), an increase of about 40% from last week, setting a record high. Affected by U.S. President Trump’s remarks on curbing the depreciation of the yen and the instability of the U.S. economy, the trend of buying yen and selling dollars has strengthened.

On March 3, Trump said, “Whether it is the Japanese yen or the Chinese renminbi, if they let the currency depreciate, it will bring us a very unfair disadvantage,” implying that China and Japan are inducing currency depreciation or will impose tariffs. Some analysts believe that the market’s view that Trump is curbing the depreciation of the yen has strengthened, and speculative funds have increased bets on the appreciation of the yen.

In addition, concerns about the slowdown in the U.S. economy are also driving yen buying. A series of indicators reflecting the slowdown in the U.S. economy, such as the U.S. manufacturing sentiment index in February being lower than market expectations, have been released one after another. Akira Moroga, chief market strategist at Japan’s Aozora Bank, said, “Speculative funds’ yen purchases have shown an unexpected growth, and positions may shift significantly to yen purchases.”

Affected by speculative funds buying yen, the appreciation of the yen against the dollar in the spot market is strengthening. On March 7, the yen appreciated to around 146 yen per dollar, reaching its highest level in about four months since early October 2024. In the Tokyo market on March 10, it also appreciated to around 147 yen.

On the other hand, there is also a view that the appreciation of the yen will not last long. Holding a long position in the yen will incur costs caused by the interest rate differential between the United States and Japan. Therefore, if the appreciation of the yen becomes unpredictable, the trend of closing long positions in the yen will be easy to strengthen. Juntaro Morimoto, a senior analyst at Sony Financial Group, said, “In the short term, the yen may appreciate to around 145 yen per dollar, but it may not turn into a long-term appreciation trend of the yen.”

Hiroyuki Machida of ANZ Bank pointed out that “taking the U.S. inflation indicators as an opportunity, the exchange rate trend may return to the appreciation of the U.S. dollar against the yen.”