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[Yen Plunge Sparks Intervention Speculation, Dollar Remains Strong] 1. Monday's forex market focus shifted to the yen. Last week's sharp yen depreciation sparked speculation about a possible currency inquiry by Tokyo; following interest rate hikes by several major central banks last week, investors are also weighing the interest rate outlook. Currently, the USD/JPY/USD pair is trading in a narrow range near last week's lows. With Japanese markets closed for holidays and liquidity low, traders are closely watching for potential intervention. 2. The Bank of Japan raised interest rates to a 31-year high of 1.25% last Friday, but failed to boost the yen. Two policy committee members voted against the rate hike, and the lack of clear hawkish guidance disappointed investors. 3. The yen subsequently plunged, and Nikkei reported that Japanese officials had conducted a currency inquiry. A currency inquiry is when authorities ask banks for quotes to assess market conditions; traders often see it as a precursor to foreign exchange intervention. 4. The Federal Reserve and the European Central Bank also raised interest rates this month and warned that further tightening of policy may be necessary to combat inflation given the nearly seven-month-long Middle East war. HSBC economist Fan Limin stated that the Fed's consistent rate hikes and hawkish signals make it more difficult for the Bank of Japan to convey policy signals. 5. In early September, the yen rose to a seven-month high as traders bet on a faster rate hike by the Bank of Japan and signs of Japanese investors repatriating funds, but has since given back some of those gains. Fan Limin stated that the threshold for the Bank of Japan to convince the market of its hawkish stance and stabilize yen expectations remains high, and its determination to raise rates may be tested again in the future. 6. The euro was largely unchanged against the dollar, hovering around 1.148. German state election forecasts show the far-right Alternative for Germany (AfD) in first place, a major blow to Chancellor Merz's conservative party. ING economists stated that this reflects low approval ratings for the federal government and Merz; years of economic stagnation have fueled political polarization, making it even harder for the economy to emerge from stagnation. 7. The dollar index held steady around 100.24, after rising more than 1% following the Fed's rate hike last week, when the Fed hinted at further rate increases. CME Group's FedWatch tool shows traders expect a 55% probability of a Fed rate hike in October, up from 42.5% a week earlier, and a nearly 90% probability of a rate hike in December. Jefferies economist Thomas Simons stated that the midterm elections will not be a constraint on an October rate hike; whether a rate hike will occur in December depends on economic data and geopolitical tensions; the interest rate path in 2027 will depend on the labor market, with a possible rate cut in the second half of the year.