Summer Lull Ends as Markets Eye Yen Intervention and Gulf Tensions

Market activity shows no signs of slowing down despite it being mid-August. One key area of focus is the Japanese yen, which has been plummeting to four-decade lows. This has sparked concerns about fuel imports becoming more expensive due to an energy shock.

US Treasury Secretary's 'to-do' list, obtained by a currency trader, includes purchases of yen. A joint US-Japanese intervention has also taken place to stem yen weakness, but FX traders are still uncertain about the next steps policymakers will take.

They are waiting for signals on whether Japan's central bank is preparing a September rate hike to support the yen's rebound and whether the use of euros instead of dollars in the US intervention indicates that the dollar's reserve-currency status may be under threat.

Another area of focus is the ongoing conflict in the Gulf, with Iran and Oman negotiating an interim deal that would give Tehran control over the Strait of Hormuz. While this has sparked some optimism, expectations remain modest due to the conflict's 24th week and recent attacks on Saudi Arabia and tankers in the Red Sea.