Yen Holds Gains After Joint Intervention by Tokyo and Washington

The yen maintained its gains after last week's joint intervention by Tokyo and Washington, keeping speculators cautious about rebuilding bearish positions. The currency weakened in Asia trade, down 0.2% at 157.55 per dollar, but remained above its 40-year low of 163.99 touched in July.

Japan confirmed coordinated yen-buying intervention with the US on Friday, which drove the yen up as much as 5% over the last three trading sessions. Tomo Kinoshita, global market strategist for Japan at Invesco, expects concerns about further intervention to constrain downside pressure on the yen in the near term.

Market sources told Reuters that the US Treasury bought yen for euros instead of selling dollars last week, a highly unusual move aimed at helping Japan strengthen the yen without encouraging a softer dollar. Analysts at Citi noted trading volumes in dollar/yen hit $27 billion in the early morning window on Monday, compared to recent averages.

The dollar index bounced from its 1-1/2-month low to 100 after the US Federal Reserve kept rates on hold last week, and investors are now focusing on Friday's nonfarm payrolls for July as a key input into the timing of the eventual tightening cycle. The market is pricing in roughly 35 basis points worth of Fed rate hikes by December.