Yen Holds Firm After Coordinated Intervention

The yen has maintained most of its gains from last week's rare coordinated intervention by Tokyo and Washington, but slipped slightly on Tuesday. The Japanese currency had rallied as much as 5% over the last three trading sessions after Japan confirmed that it had intervened with the U.S. in a joint effort to support the yen. According to Axel Merk, chief investment officer at Merk Investments, 'the joint action by Japan and the U.S. appears to be signalling to the market not to short the yen.'

The intervention was unusual as the U.S. Treasury bought yen for euros last week instead of selling dollars, a highly unusual move likely aimed at helping Japan strengthen the yen without encouraging a view that Washington wants a softer dollar.

Despite the intervention, analysts at TS Lombard are still concerned about yen short positioning being 'particularly risky given the risk of intervention by Japanese and U.S. monetary authorities.'