Yen Steadies as Intervention Boost Fades Amid RBA Policy Decision

The Japanese yen steadied on Tuesday after a sharp drop in the previous session as the joint US-Japan intervention failed to deliver a lasting boost. The yen firmed to 158.93 per US dollar in Asian hours but remained further away from the three-month high of 155.20 hit last week following the rare intervention at the end of July.

The US-Japan effort came after the yen hit a 40-year low of 163.99 per dollar, but it has since erased nearly half of the gains, leaving traders speculating that it was a matter of when, not if, authorities would return to the currency market.

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

Analysts suspect that speculators will use the opportunity to rebuild their short positions, and a move back to 160.0 at some point this month remains a tangible risk, even if September ends up delivering both a Bank of Japan hike and a hold from the US Federal Reserve.