Yen Hits Three Month Weekly Low as Traders Anticipate Further Intervention

The Japanese yen is headed for its largest weekly loss in three months, falling approximately 1% to 159.43 per dollar. This decline follows a period where the currency surrendered about half of the gains it made after official interventions in late July and early August. Traders are now wagering that another round of official buying may be necessary to stabilize the currency, with the 160 level viewed as a potential trigger for fresh action.

Mitsuhiro Furusawa, a former top currency diplomat for Tokyo, stated that Japan may conduct more joint yen intervention at any time. He also suggested that Tokyo might signal faster than expected interest rate hikes to prevent further falls. Market expectations for a Bank of Japan rate hike in September have risen to 76%, up from 24% on July 30.

Analysts suggest that the yen's retreat was expected because interventions are often temporary. OCBC strategist Sim Moh Siong noted that a more hawkish stance from the Bank of Japan is required to change the trend. Meanwhile, the broader currency market remained relatively steady. The U.S. dollar found support from higher oil prices and Middle East tension, while benign U.S. jobs and inflation reports reduced expectations for U.S. interest rate hikes.

Other regional currencies showed mixed results. The South Korean won remained steadier than the yen, though it was set for a modest loss of 0.6% this week. China's yuan hovered at 6.7452 in offshore trade, remaining near a 3.5 year high.