Yen on Brink of Biggest Weekly Drop in Three Months Amid Fresh Intervention Fears

The Japanese yen is headed for its biggest weekly decline in three months as market participants reassess the Bank of Japan's next move. The currency has lost around 1% this week and traded at 159.43 per dollar, having already surrendered roughly half of the gains it made following intervention by the US and Japan in late July and early August.

The yen was trading near 164 per dollar before the intervention, but traders view the 160-yen level as a potential trigger for fresh action by Japanese authorities. The Bank of Japan's actions will determine whether intervention can alter the yen's long-term trend, according to OCBC strategist Sim Moh Siong.

The market puts the probability of a Bank of Japan rate hike in September at 76%, up from 24% on July 30. Elevated expectations create a risk of another weakening of the yen if the regulator's decision disappoints investors.