Yen Steadies After Joint Intervention Fails to Deliver Lasting Gains

The yen has steadied after a sharp drop in the previous session as the joint U.S.-Japan intervention failed to deliver a lasting boost. The yen firmed to 158.93 per U.S. dollar in Asian hours, but remains further away from the three-month high of 155.20 hit last week in the wake of the rare U.S.-Japan yen-buying intervention at the end of July.

The joint effort came after the yen hit a 40-year low of 163.99 per dollar, but the yen has since erased nearly half of the gains. Marc Chandler, chief market strategist at Bannockburn Capital Markets, said 'The market is challenging the resolve of Japanese and U.S. officials.'

Speculators have slashed their bearish bets on the Japanese yen by the most in over 12 years, with data from a U.S. regulator showing the net short position in the yen fell by $8.865 billion to $3.604 billion in the week to August 4.

However, analysts suspect that speculators will use the opportunity to rebuild their short positions. ING strategists said 'The path ahead may remain choppy. A move back to 160.0 at some point this month remains a tangible risk.'