The yen headed for its biggest weekly loss in three months on Friday as the impact of U.S. and Japanese intervention faded, leaving traders to wager another round of official buying would be needed to stem the rot.<\/p>\n
Vcg | Visual China Group | Getty Images<\/p>\n
The yen headed for its biggest weekly loss in three months on Friday as the impact of U.S. and Japanese intervention faded, leaving traders to wager another round of official buying would be needed to stem the rot.<\/p>\n
The currency<\/a>\u00a0has surrendered roughly half the\u00a0gains sparked by intervention in late July and early August, falling about 1% this week to 159.43 per dollar. It was trading near 164 per dollar before July’s intervention and traders see the 160 level as\u00a0a potential trigger for fresh official\u00a0action.<\/p>\n The yen’s retreat is set to be its biggest weekly drop since May, when it was also backsliding after a round of official buying. A fall of about 0.8% to 183.91 yen per euro<\/a>\u00a0this week is the largest since April.<\/p>\n The Japanese currency was stable early on Friday but has been falling for years, and was at near four-decade lows before the intervention, on a combination of perennially low interest rates and\u00a0newer confidence concerns\u00a0around government spending and funding.<\/p>\n The broader currency market has been fairly steady this week, with support for the dollar from higher oil prices and\u00a0Middle East tension\u00a0offset by benign U.S. jobs and inflation reports that reduced expectations for U.S. interest rate hikes.<\/p>\n Overnight figures showing unchanged U.S.\u00a0producer prices\u00a0in July further supported dialing back bets on a September hike, now seen as a roughly 35% chance.<\/p>\n The euro<\/a>\u00a0edged 0.2% lower to $1.1536 this week while sterling<\/a>\u00a0was flat at $1.3489. A surprisingly low inflation expectations reading knocked the New Zealand dollar<\/a>\u00a0on Thursday, but it bounced back as the swap market stuck with an 85% chance of a rate hike in September. The Australian dollar<\/a>\u00a0hovered at $0.7060.<\/p>\n The onus is on BOJ<\/p>\n Japan may conduct more joint yen intervention “at any time” and signal the chance of faster-than-expected interest rate hikes to stem further falls, Tokyo’s former top currency diplomat\u00a0Mitsuhiro Furusawa\u00a0told Reuters in an interview.<\/p>\n Markets have\u00a0already bet on the Bank of Japan raising rates further and sooner than previously expected after U.S. Treasury Secretary Scott Bessent said Japan\u00a0should reinforce\u00a0currency intervention with policies and fundamentals that underpin the yen.<\/p>\n “It’s not much of a surprise that the yen has retraced,” said OCBC strategist Sim Moh Siong.<\/p>\n “Because for the intervention to change the yen trend, we need to see a more hawkish BOJ stance, which the market is trying to price in, but at the same time, we need validation,” he said. “The onus is on BOJ to step up.”<\/p>\n Markets currently see a 76% chance of a BOJ hike in September, according to Tokyo Tanshi data, a dramatic increase compared with 24% on July 30, but one which also opens the door to yen falls if investors are disappointed.<\/p>\n China’s yuan<\/a>\u00a0hovered at 6.7452 in offshore trade on Friday, not far from a 3-1\/2-year high touched last week.<\/p>\n