Yen Retreats on Intervention Fears Amid Rising US Rate Hopes

The Japanese yen retreated on Monday, falling for its fifth time in six sessions. Investors were cautious about potential intervention from Tokyo as Japan's markets were closed for a three-day holiday, leading to lower liquidity and increased volatility.

The yen weakened by 0.38% against the dollar to 157.48 per greenback. The Bank of Japan raised interest rates on Friday to their highest level in 31 years at 1.25%, but with two dissenting votes and a lack of explicitly hawkish guidance, investors were hesitant to buy the currency.

On the heels of the rate decision, the yen fell sharply before a slight rebound as reports emerged that Japanese officials had conducted rate checks, often seen as a precursor to currency intervention. Marc Chandler, chief market strategist at Bannockburn Capital Markets in New York, noted, 'With Japan on holiday, people think about what happened in late April, early May when they were on holiday, they intervened. I don't think that intervention at 157, 157 and a half is very likely.'

Meanwhile, the dollar index rose by 0.13% to 100.40 as investors priced in a higher chance of a rate hike from the Federal Reserve. The CME FedWatch tool showed a 55.4% probability of at least a 25 basis point rate increase at the October meeting, up from 43.5% a week earlier.