Yen Pulls Back Amid Lack of Intervention

The Japanese yen weakened toward 162 per dollar on Monday, giving back about half of its July 2 gains as Tokyo has yet to intervene despite repeated warnings from officials. Investors also remain skeptical that any intervention would provide lasting support for the currency. Late last week, the yen rebounded sharply from 40-year lows after reports suggested Japan may stop signaling its intervention plans in advance to catch traders off guard and help unwind speculative bets against the currency. Finance Minister Satsuki Katayama also reiterated that authorities are prepared to step into the market at any time if needed, adding that Japan and the US remain in close contact on foreign exchange policy. Meanwhile, the yen continued to draw support from a weaker dollar after soft US jobs data prompted traders to scale back expectations for Federal Reserve interest rate hikes this year.

The Japanese yen appreciated past 161 per dollar on Friday, extending a nearly 1% gain in the previous session, as Finance Minister Satsuki Katayama reiterated that authorities stand ready to intervene at any time to support the currency. Her comments came amid growing speculation over another round of intervention, with thin liquidity during the US holiday weekend seen as creating favorable conditions for official action. Katayama also said Japan and the US remain in close communication on foreign exchange policy. On Thursday, the yen rebounded sharply from 40-year lows after reports suggested Japan may stop signaling intervention plans in advance, catching traders off guard and helping unwind speculative positions against the currency. The yen also drew support from a weaker dollar after softer-than-expected US jobs data prompted traders to reduce expectations for Federal Reserve rate hikes this year.

The Japanese yen jumped nearly 1% toward 161 per dollar on Thursday before trimming its gains, rebounding from four-decade lows as traders stayed on high alert for possible currency intervention. The move followed a Reuters report that Japan may stop signaling its intervention plans in advance, unlike before the April 30 operation, with the new approach potentially proving more effective in catching traders off guard and unwinding speculative bets against the yen. The yen also found some support after Federal Reserve Chair Kevin Warsh said US inflation expectations had eased over the past month, signaling there was no urgency to raise interest rates. Meanwhile, investors remain skeptical that the Bank of Japan will accelerate policy tightening as it continues its gradual normalization path, with persistent carry trades and the still-wide interest rate differential between Japan and the US continuing to weigh on the currency.