Strong Yen Pressures Dollar Index; Bitcoin and Gold Benefit in the Short Term

Huo Xing Finance reports that the Japanese yen has recently strengthened significantly against the U.S. dollar, with the USD/JPY exchange rate falling 1.4% to 156.4, following a 0.9% decline on Wednesday. The U.S. Dollar Index (DXY) subsequently dropped 0.4% to 99.22, testing its 200-day moving average near 99.1. Against this backdrop, Bitcoin and gold have risen in tandem, contradicting the traditional view that a stronger yen typically triggers risk-off selling. Analysts note that the yen’s strength benefits Bitcoin primarily because it pressures the U.S. dollar index; a weaker dollar generally supports dollar-denominated assets and eases global financial conditions. However, if the yen’s rally accelerates, this dynamic could quickly reverse. Over the past decade, traders have extensively borrowed cheap yen to fund bullish bets on stocks, bonds, and even cryptocurrencies; a disorderly yen appreciation could trigger unwinding of these positions, sparking risk aversion. A rapid yen appreciation previously pressured Bitcoin—most notably in August 2024 during the unwinding of yen carry trades, when Bitcoin fell approximately 20% over several days. Currently, traders are increasingly betting that the Bank of Japan will raise its interest rate from 1% to 1.25% at its September 18 meeting, and reports indicate prior intervention by U.S. and Japanese authorities to support the yen, leaving little resistance to further yen strength.