Yen surrenders nearly half its gains from US-Japan intervention; traders speculate on fresh action

Published Fri, Aug 7, 2026 · 10:39 AM

THE YEN is heading into the end of the week having surrendered nearly half of its intervention-driven gains, fuelling speculation among traders that authorities may step into the market again.

The currency traded around 158.45 versus the US dollar on Friday morning (Aug 7), well off the strong point of 155.23 reached on Monday. It had been near a four-decade nadir around 164 per US dollar last week before the first joint yen-buying operation from Japan and the US since 1998.

The yen was up 0.02 per cent against the Singapore dollar at 123.37 yen per Singapore dollar in early Friday trading.

The pullback underscores the limits of intervention in reversing the yen’s longer-term decline, with a wide interest-rate gap to the US, Japan’s high debt load and geopolitical uncertainty continuing to weigh on the currency.

Meanwhile, the US dollar on Thursday posted its biggest daily gain in two weeks as oil prices climbed, reflecting fading optimism that tensions in the Middle East would ease.

US and Japanese officials have warned investors they’re determined to keep defending the yen if needed.

“The possibility of another round of intervention is high especially as dollar-yen approaches 160,” said OCBC strategist Moh Siong Sim. But “for intervention to be effective, it needs to be accompanied by faster BOJ rate hikes or a backdrop favouring Federal Reserve easing.”

While the Bank of Japan left its benchmark rate unchanged on Jul 31, overnight index swaps imply about a 60 per cent chance of a rate hike by September. Japan’s top currency official, Atsushi Mimura, said authorities would respond to foreign-exchange moves in coordination with monetary policy.

“It’s a week on from the initial burst of intervention that triggered a USD/JPY swoon but already the focus is shifting back toward Treasury yields as the catalyst for a firmer dollar,” said Bloomberg Markets Live strategist Mark Cranfield. “FX traders have also seen a second failure to drive dollar-yen below 155, which is making Scott Bessent’s tactics look like a one-and-done event.”

Japan’s spending on yen intervention

Japan said it intervened in the currency market three times during the spring Golden Week holiday to prop up the yen, going beyond its recent twin-punch playbook with an additional round in an apparent effort to maximise the psychological impact on investors.

Authorities likely used around US$34 billion intervening in the currency market to support the yen on Jul 31, a Bloomberg analysis of central bank accounts indicates. The action came after authorities spent an estimated US$53 billion the previous day, in what would likely be the largest single-day intervention on record if confirmed.

Intervention “could buy time to have a more credible policy mix or to craft a better message to investors,” said Idanna Appio, portfolio manager at First Eagle Investments. “But I don’t think on its own, it can be successful.”

Traders are also cautious ahead of Friday’s US payroll figures as US Fed Chairman Kevin Warsh leaves Wall Street guessing at his next move. US dollar-yen’s one-week implied volatility, which includes payrolls data as well as next week’s report on inflation, rose on Friday.

“Joint action remains possible,” said Charu Chanana, chief investment strategist at Saxo Markets. “US Treasury Secretary Scott Bessent’s ‘whatever it takes’ language and the US Treasury’s instruction for banks to remain ready for future action suggest last Friday was not necessarily a one-off.” BLOOMBERG