Yen clings to gains from US-Japan currency intervention as traders stay alert to more
The yen had surged as much as 5% over the last three trading sessions
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[SINGAPORE] The yen held on to most of its intervention-driven gains on Tuesday (Aug 4), after last week’s joint action by Tokyo and Washington to shore up the currency kept speculators wary of rebuilding bearish positions.
The yen weakened slightly in early Asia trade and was down 0.1 per cent at 157.35 per US dollar, having touched a three-month high of 155.20 in the previous session, though it remained well above its 40-year low.
The yen is up about 0.02 per cent at 122.84 per Singapore dollar as at 9.18 am on Tuesday in Singapore.
The Japanese currency had surged as much as 5 per cent over the last three trading sessions, with Japan confirming coordinated yen-buying intervention on Friday with the US in a rare move.
“I expect concerns about the possibility of further intervention by Japanese and US authorities (to) constrain downside pressure on the yen in the near term,” said Tomo Kinoshita, global market strategist for Japan at Invesco.
“I believe that the yen is likely to appreciate against the US dollar towards the end of this year... PM (Sanae) Takaichi’s stimulus policy agenda has contributed to weakness in the yen but the market seems to have already priced in major elements of Takaichi’s policy.”
Against the euro, the yen held near a more than eight-month top and last stood at 181.19, while sterling bought 211.60 yen.
Monday’s sudden surge in the yen stirred speculation that Japanese authorities had intervened again, though officials offered no confirmation.
Analysts at Citi said trading volumes in dollar/yen hit roughly US$27 billion in the early morning window on Monday, compared with the recent averages of US$1.9 billion.
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US dollar takes a breather
The US dollar, meanwhile, was nursing losses, having slid in the wake of the yen-buying intervention and on the back of falling oil prices.
US President Donald Trump said on Monday that talks with Iran were under way, warning that it was a “last chance” for Teheran to sign a good deal to end the five-month-old war, but Iran denied that any negotiations were being held or planned.
Against the greenback, the euro was little changed at US$1.1511, having hit a 1½-month peak of US$1.1559 in the previous session, while sterling slipped 0.06 per cent to US$1.3427.
The US dollar index bounced from a 1½-month low to 99.98.
Investors had sold the US dollar after the US Federal Reserve kept rates on hold on Jul 29, with its losses accelerating following the yen intervention.
“We consider market participants overreacted by selling the USD in response to the Fed’s decision to keep the funds rate unchanged. US interest rates are going to be increased, but not on the markets’ short timeframe,” said Joseph Capurso, a strategist at Commonwealth Bank of Australia.
“This week’s non-farm payrolls for July is a key input into the timing of the eventual tightening cycle.”
Markets are currently pricing in roughly 35 basis points worth of US Fed rate hikes by December, with the focus turning to Friday’s jobs report.
In other currencies, the Australian dollar edged 0.04 per cent higher to US$0.7003, while the New Zealand dollar fell 0.1 per cent to US$0.5867. REUTERS
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