Yen Heads for Weekly Drop

The Japanese yen traded around 159.4 per dollar on Friday and was on track to lose about 1% for the week, as the absence of follow-up intervention from authorities encouraged speculators to continue betting against the currency. The yen has now retraced roughly half of the gains made in late July and early August, when Tokyo and Washington carried out record joint intervention. The currency remained under pressure from longer-term fundamentals, including wide interest rate differentials, growing fiscal concerns and elevated energy and import costs. Meanwhile, markets are speculating about a possible Bank of Japan rate hike in September or October amid concerns that a weaker yen will fuel inflation. US Treasury Secretary Scott Bessent also said Japan should reinforce currency intervention with policies and economic fundamentals that support the yen.

The Japanese yen traded around 159.3 per dollar on Thursday, hovering near the key psychological level of 160 per dollar and keeping traders on alert for further intervention from authorities amid persistent weakness. The currency remained pressured by longer-term fundamentals, including wide interest rate differentials, mounting fiscal concerns and elevated energy and import costs. The yen also struggled to gain momentum even after subdued US inflation data reduced pressure on the Federal Reserve to raise interest rates in the near term. In Japan, producer prices rose 7.2% in July, easing slightly from 7.3% in June and coming in below forecasts of 7.4%. Meanwhile, the Bank of Japan highlighted growing risks of accelerating inflation in its summary of opinions from the July meeting, with one board member suggesting that the pace of interest rate hikes could accelerate.

The Japanese yen weakened past 159 per dollar, retracing about half of the gains from its recent intervention-driven rally and testing the resolve of both Tokyo and Washington to support the currency, though traders remain on alert for fresh intervention. Japan and the US carried out a record coordinated yen-buying operation at the end of July as the currency fell to 40-year lows and raised concerns about global economic stability, but disappointed markets by not following up with additional measures. The yen remained under pressure from longer-term fundamentals, including wide interest rate differentials, mounting fiscal concerns and elevated energy and import costs. Meanwhile, the Bank of Japan highlighted growing risks of accelerating inflation in its summary of opinions from the July meeting, with one board member suggesting that the pace of interest rate hikes could accelerate.