The Japanese yen gave back some of its gains against the US dollar on Tuesday, after surging on Monday on suspected intervention by Japanese authorities.
The USD/JPY pair fell to 156.85 per dollar by 09:00 GMT, retreating from a 34-year low of 160.24 hit earlier this week. While markets suspect Japan intervened to support the yen, causing a temporary jump, confirmation is still awaited.
Analysts believe intervention alone may not be enough as long as the interest rate gap between Japan and the US persists. The Bank of Japan’s ultra-loose monetary policy keeps yields low, while the Federal Reserve is expected to maintain a hawkish stance, potentially leading to further yen weakness.
This interest rate divergence could force Japanese authorities to intervene repeatedly to slow the yen’s decline.
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