Yen's Intervention Gains Fading Fast Amid Speculation of Further Interventions

The yen's intervention-driven gains are dwindling as the currency heads into the end of the week, fuelling speculation that authorities may intervene again. On August 7, the yen traded around 158.48 against the US dollar, well off its strong point of 155.23 reached on August 3. This marks a significant pullback from its near four-decade nadir around 164 per greenback last week before the joint yen-buying operation from Japan and the United States since 1998.

The yen has also pared its roughly 4% gain against the Singapore currency after the joint intervention on July 30. At 9:40 am on August 7, the yen was trading at 123.38 per Singdollar, up 2.5% from its pre-intervention level but well off the high of 121.503 reached on August 3.

Experts warn that intervention may not be effective in reversing the yen's longer-term decline, citing a wide interest rate gap to the US, Japan's high debt load, and geopolitical uncertainty. OCBC strategist Moh Siong Sim said the possibility of another round of intervention is high, especially as dollar-yen approaches 160.

US Treasury Secretary Scott Bessent's 'whatever it takes' language and the US Treasury's instruction for banks to remain ready for future action suggest that last Friday was not necessarily a one-off. Joint action remains possible, according to Charu Chanana, chief investment strategist at Saxo Markets.