Yen Under Pressure as Joint Intervention Effects Fade

The yen has become the worst-performing G-10 currency in August as the effects of the joint US-Japan intervention in the foreign-exchange market begin to fade. As of August 10, the yen had fallen about 0.5% against the dollar this month, making it the weakest among its peers.

This decline reverses some of the 3.2% gain it posted in July. The currency briefly strengthened after weaker-than-expected US employment data last week but soon resumed its decline.

Market participants are waiting for another round of intervention by Japanese authorities, which may be triggered by Japan's Obon holiday thinning trading. However, the yen may remain under pressure due to the underlying drivers of its weakness, including the interest-rate gap between the US and Japan, as well as concerns about Japan's fiscal expansion.

According to a report from Nomura Securities, attention will focus on signals from Japanese and US authorities regarding their willingness to intervene in the market. Goldman Sachs noted that the limited market response to the joint intervention reflected the fact that the root causes of yen weakness remain unresolved.