The yen steadied at 157.72 per dollar on Wednesday after last week's coordinated US-Japan intervention, while the dollar hovered near six-week lows as fading safe-haven demand over the Iran war weighed on the greenback. Bank of America has cut its year-end USD/JPY forecast to around 149 from 152, citing the intervention and expectations of faster Bank of Japan tightening.
The yen firmed slightly to 157.72 per dollar on Wednesday after falling 0.4% a day earlier. It had already jumped on Monday to 155.2 per dollar, a sharp turn from the 164 level it touched just a week before — its weakest in 40 years.
Intervention raises the bar for further moves
The rebound follows the first yen-buying intervention by U.S. authorities since 1998, carried out jointly by Tokyo and Washington. According to Reuters, U.S. Treasury Secretary Scott Bessent said the U.S. would do "whatever it takes" to support Japan's efforts to stabilize the yen, a pledge that echoed Mario Draghi's 2012 vow to preserve the euro during Europe's debt crisis.
Strategists caution the currency move may not hold on its own. CIBC's Jeremy Stretch said further support would likely need a more aggressive Bank of Japan, a lower chance of Fed rate increases, or a lower oil price. Bessent also said he was confident BOJ Governor Kazuo Ueda would do what is best for Japan's economy, fueling expectations the central bank could act at its September policy meeting.
Dollar eases as Iran optimism fades safe-haven bids
The dollar index slipped 0.16% to 99.70 after touching a six-week low on Monday. Oil traded back around $80 a barrel as President Trump said his administration's talks with Iran had gone very well, cutting investors' incentive to buy the dollar as a haven.
Traders also pared back Fed rate hike bets: the probability of a September increase stood just below 60% on Wednesday, down from closer to 70% at the start of the week. Kansas City Fed President Jeff Schmid said some tightening was still needed to bring inflation back to the Fed's 2% target. The euro rose 0.17% to $1.1552, while the pound edged up 0.09% to $1.3465.
BofA sees yen strengthening further by year end
Bank of America has cut its year-end USD/JPY forecast to around 149 from a prior call of 152, implying roughly 6% appreciation from levels around 158. Analysts including Shusuke Yamada said the intervention raises the bar for what counts as a successful defence of the yen going forward.
BofA said the gains will likely need follow-through from the Bank of Japan, arguing a September rather than October rate move would let the bank show it is ahead of upside inflation risk.
Sources: Investing.com/Reuters, InvestingLive
Trading involves risk.
Risk Disclaimer
