Yen Gains Fizzle as Traders Speculate on Fresh Intervention

The Japanese yen has given back nearly half of its gains from recent US-Japan intervention, sparking speculation that authorities may step in again to support the currency.

On Friday morning (Aug 7), the yen traded around 158.45 versus the US dollar, down from a high of 155.23 on Monday and near a four-decade nadir of 164 per US dollar reached last week.

The intervention-driven gains had been short-lived, as the yen's longer-term decline remains due to a wide interest-rate gap with the US, Japan's high debt load, and geopolitical uncertainty.

Traders are speculating about another round of intervention, especially as dollar-yen approaches 160. Moh Siong Sim from OCBC said that for intervention to be effective, it needs to be accompanied by faster BOJ rate hikes or a backdrop favouring Federal Reserve easing.