Yen Weakens as Intervention Effect Fades
he Japanese yen weakened slightly during Tuesday's trading (August 4) but retained much of the gains achieved following a joint intervention by Japan and the US. The USD/JPY pair rose approximately 0.25% to 157.56, having previously dropped to 155.20—the yen's strongest level in three months.
Over the last three sessions, the yen had appreciated by around 5%. This strengthening followed confirmation from Tokyo and Washington of coordinated yen purchases aimed at halting the Japanese currency's slide; in July, the yen had hit a 40-year low of 163.99 against the US dollar.
The intervention was viewed as a strong signal to market participants to stop betting against the yen. US Treasury Secretary Scott Bessent even described the yen as significantly undervalued and affirmed Washington's readiness to assist Japan in maintaining currency stability.
However, the impact of interventions is typically short-lived unless supported by fundamental shifts. Divergent policy paths between the Bank of Japan and the Federal Reserve, along with the yield gap between US and Japanese bonds, could still prompt investors to resume selling the yen. Most analysts also anticipate that the Bank of Japan will need to raise interest rates to ensure a sustained recovery for the yen.
Against the euro, the yen weakened by about 0.33% to 181.36 per euro, after having strengthened to 179.435—its strongest level in nearly nine months—in the previous session. This movement suggests that some investors are beginning to take profits following the yen's sharp rally.
Newsmaker Analysis: USD/JPY may consolidate following the high volatility caused by the intervention. The 158.00–160.00 range serves as the immediate resistance area, while 155.20 acts as a key support level. Should USD/JPY break back above 160.00, the market might anticipate further intervention. Conversely, a drop below 155.20 could pave the way for the yen to strengthen toward the 153.00 level. However, without a Bank of Japan (BoJ) rate hike or a decline in US yields, any yen appreciation risks being short-lived. (arl)
Source: Newsmaker.id
