The joint effort came after the yen hit a 40-year low of 163.99 per dollar but the yen has since erased nearly half of the gains, leaving traders speculating it was a matter of when, not if, authorities would return to the currency market. “The market is challenging the resolve of Japanese and U.S. officials,” said Marc Chandler, chief market strategist at Bannockburn Capital Markets. Trading was thinner than usual, with Japanese markets closed for a holiday.
Speculators slashed their bearish bets on the Japanese yen by the most in over 12 years, with data from a U.S. regulator showing the net short position in the yen fell by $8.865 billion to $3.604 billion in the week to August 4.
But as in previous episodes of intervention, analysts suspect that speculators will use the opportunity to rebuild their short positions. “The path ahead may remain choppy,” said ING strategists. “A move back to 160.0 at some point this month remains a tangible risk, even if September ends up delivering both a Bank of Japan hike and a hold from the U.S. Federal Reserve.” Traders are pricing in just a shade over 50% chance of a rate hike from the BOJ, LSEG data showed. The BOJ’s tightening path is also being complicated by the rising political pressure to support the bond market. Investor focus later in the day will be on the Reserve Bank of Australia policy decision, where the RBA is expected to keep its policy rate unchanged with the focus on comments from policymakers. The Aussie stood at $0.7057. “The RBA is likely to emphasise inflation remains elevated and that it is prepared to raise the cash rate again if required,” said Carol Kong, currency strategist at Commonwealth Bank of Australia.
“The ongoing conflict in the Middle East could encourage further cost pass through to consumer prices in Q3 2026. But softer inflation and the weakness in the housing market give the RBA scope to assess the lagged effects of earlier tightening.”
The U.S. dollar was steady against most major currencies as oil prices hovered near one-week highs amid dimming hopes of a deal between the U.S. and Iran to end the conflict in the Middle East. The euro fetched $1.1544 while sterling was at $1.3509 in Asian hours.
Attention will also be on Wednesday’s U.S. consumer price index data that could showcase the impact of the war on pricing pressures with producer price data on Thursday and retail sales figures on Friday offering further clues on the path of inflation.
