The yen is testing the psychologically important 160-per-dollar level again, giving back roughly half the gains from last month’s historic joint US-Japan intervention as speculators return to betting against the currency.
USD/JPY is trading near 159.6, a two-week high for the pair, after the yen strengthened as far as 155 in the days following the coordinated intervention before steadily giving back that ground. The pair has now retraced roughly half of the move sparked by the joint action, which at the time was the largest yen intervention in 15 years.
The 160 level has effectively become a political line in the sand for Japanese and US authorities, with a rapid break above it seen as the kind of move that could draw officials back into the market a second time. Without follow-up intervention so far, speculators have grown increasingly comfortable pressing the currency lower, with the yen on track to lose roughly 1% for the week.
Markets are increasingly speculating about a possible Bank of Japan rate hike in September or October, as policymakers weigh the inflationary risk of continued yen weakness against the broader economic picture. History offers a note of caution here: after Japan’s solo intervention earlier this year, the yen was back at fresh multi-decade lows within months, raising questions about how durable this latest round of support will prove to be.
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