The Japanese yen strengthened sharply on Monday, keeping investors on alert for possible further intervention by Japanese authorities after a coordinated move by Japan and the United States to support the currency.
The yen climbed 1% during Asian trading, reaching an intraday high of 156.01 against the US dollar.
The latest gains followed a surge of more than 3% over the previous two trading sessions, after Japan’s Finance Ministry confirmed on Friday that it had carried out a joint yen-buying intervention with the United States.
Data from the Bank of Japan (BOJ) also suggested the country may have spent as much as US$58.97 billion purchasing yen on Thursday.
BBH Global Head of Markets Strategy Elias Haddad said coordinated foreign exchange interventions have historically been effective.
“History is clear. Joint FX intervention packs a punch, and investors should follow the direction of official intervention rather than bet against it,” he said, noting that all three coordinated US foreign exchange interventions since 1998 had been successful.
The yen has remained under pressure in recent years due to the BOJ’s gradual approach to tightening monetary policy, leaving interest rate differences between Japan and other major economies relatively wide.
Analysts at Goldman Sachs said encouraging Japanese investors to repatriate overseas assets could have a stronger long-term impact on the currency than intervention alone.
They added that authorities would likely intervene again if the yen surrendered its recent gains.
The stronger yen weighed on the US dollar, with the euro rising to a one-and-a-half-month high of US$1.1559, while the British pound traded near a two-week high at US$1.3484.
The US Dollar Index remained largely unchanged at 99.78 after falling more than 1.5% last week.
The dollar also came under pressure following a decline in oil prices after US President Donald Trump announced that planned military action against Iran had been called off and confirmed that fresh talks with Tehran would take place on Monday.
Elsewhere, the Australian dollar rose 0.3% to US$0.7042, while the New Zealand dollar gained 0.13% to US$0.5898.
Investors are now turning their attention to Friday’s US nonfarm payrolls report, which is expected to provide fresh clues on the strength of the US labour market and the Federal Reserve’s next interest rate decision.
Analysts at OCBC said a resilient jobs market or signs that inflation remains stubborn could increase pressure on the Federal Reserve to maintain its fight against inflation.
They added that with several key inflation and employment reports due before the Fed’s September policy meeting, upcoming economic data will play a crucial role in shaping market expectations.
