The yen declined slightly on Tuesday but held onto the majority of its recent gains following coordinated intervention by Japan and the United States the previous week. The currency traded at 157.8 per dollar, down 0.4% from the prior session, after hitting a three-month peak of 155.20. The yen had appreciated approximately 5% over the preceding three trading days following the joint yen-buying action announced by Tokyo and Washington on Friday, a rare coordinated move that kept traders cautious about re-establishing bearish positions.
Analysts noted that while the intervention provided near-term support, longer-term currency strength would require fundamental economic changes. A senior currency analyst at MUFG observed that Japan’s significantly lower interest rates compared to the United States remained a structural headwind for the yen over the past five years. Market sources reported that the U.S. Treasury purchased yen in exchange for euros rather than selling dollars, an unusual tactic aimed at supporting the Japanese currency without signaling a desire for a weaker dollar. Against the euro, the yen slipped 0.5% to 181.62.
Monday’s sharp yen rally sparked speculation of additional Japanese intervention, though official confirmation was not provided. Trading volumes in the dollar-yen pair reached approximately $27 billion in early morning transactions on Monday, significantly above the recent average of $1.9 billion. Bank of America strategists highlighted 155 yen per dollar as a potential key support level, noting the currency pair had found a floor near that point during interventions in April and May.
Meanwhile, the dollar retreated following the yen intervention and amid declining oil prices. The dollar index recovered from a 1-1/2-month low to 100. The euro remained largely flat at $1.151, while sterling traded at $1.343, and the Australian dollar rose 0.3% to $0.702. Market participants had sold dollars after the Federal Reserve maintained interest rates last week, with selling pressure intensifying after the yen action. A Commonwealth Bank strategist identified the upcoming July nonfarm payrolls report as a critical input for assessing the timing of eventual Fed rate increases, with markets currently pricing roughly 35 basis points of rate hikes by December.
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