The yen held onto most of its recent gains on Tuesday, August 4th, following a coordinated yen-buying intervention by Japan and the US last Friday. The Japanese currency had surged as much as 5 percent over the past three trading sessions due to the intervention. While it weakened slightly in early Asia trade to 157.35 per US dollar, down 0.1 percent, it remained significantly above its 40-year low and its three-month high of 155.20. Against the Singapore dollar, the yen slipped 0.06 percent to 122.94 yen per Singapore dollar.
Analysts noted exceptionally high trading volumes in dollar/yen, with approximately $27 billion traded in Monday's early morning window, a substantial increase from the recent average of $1.9 billion. This surge in trading activity, coupled with a sudden yen appreciation on Monday, fueled speculation of further Japanese intervention, though officials did not confirm it. Tomo Kinoshita, a global market strategist for Japan at Invesco, anticipates that concerns about potential future interventions by Japanese and US authorities will limit downward pressure on the yen in the near term.
Meanwhile, the US dollar experienced losses following the yen intervention and a decision by the US Federal Reserve on July 29 to keep interest rates on hold. Investors had sold the US dollar in response, and its decline accelerated after the yen intervention. Joseph Capurso, a strategist at Commonwealth Bank of Australia, suggested that market participants overreacted to the Fed's decision, expecting US interest rates to increase eventually, though not on the market's short timeframe. The US dollar index bounced from a 1.5-month low to 99.98.
In geopolitical news, US President Donald Trump stated that talks with Iran were underway, presenting them as a "last chance" for Tehran to agree to a deal and end a five-month-old war. However, Iran denied any ongoing or planned negotiations. Markets are closely watching for Friday's jobs report, which is seen as a key indicator for the timing of the Federal Reserve's eventual tightening cycle, with approximately 35 basis points of US Fed rate hikes by December currently priced in.
