Yen's Slide Continues as Traders Bet on Another Intervention

The Japanese yen continues to decline, reaching its biggest weekly loss in three months. The currency has dropped about half of the gains it made following intervention in late July and early August, falling around 1% this week to 159.43 per dollar. This significant drop is expected to be the yen's largest since May, when it also experienced a decline after official buying.

The yen was trading near 164 per dollar before the intervention, and traders believe that if it breaks below 160 per dollar, there may be another round of official buying to stem the currency's slide. The impact of the previous intervention has started to fade, leaving investors wondering whether more action is needed to stabilize the yen.

According to Tokyo Tanshi data, markets now see a 76% chance of a Bank of Japan interest rate hike in September, compared to just 24% on July 30. This significant increase in expectations has opened up the possibility of further yen falls if investors are disappointed by the BOJ's actions.

Former top currency diplomat Mitsuhiro Furusawa told Reuters that Japan may conduct more joint yen intervention 'at any time' and signal the chance of faster-than-expected interest rate hikes to combat the yen's decline. Markets have already bet on the BOJ raising rates further and sooner than previously expected, following comments from U.S. Treasury Secretary Scott Bessent.