Yen weakness has flared up again, once more prompting speculation that Japan could intervene and the Bank of Japan could raise rates. The yen has fallen around 1% this week, with USD/JPY trading in the low ¥159s.
The yen's decline has gathered momentum again, fueling speculation that the effects of the intervention in late July and early August are wearing off. The market is gauging the levels at which another intervention could become a reality, while also focusing on the direction of the Bank of Japan's interest-rate policy.
The yen has fallen around 1% against the dollar this week, trading at around ¥159.43 per dollar. It has already given back about half of its post-intervention gains. Against the euro, it has fallen around 0.8% to approximately ¥183.91 per euro.
While expectations for further US rate hikes have receded against the backdrop of US economic data, the focus is on how the Bank of Japan will respond on monetary policy. Investors are closely watching the BOJ's next move, which will influence the direction of Japan's markets.
東京短資 estimates the probability of a Bank of Japan rate hike in September at 76%, while some observers have pointed to the risk that a decision could disappoint investors if expectations become excessively elevated.