The yen's decline was seen accelerating in the Tokyo market despite the market holiday. The key focus is the risk of continued yen depreciation after intervention is halted, along with developments at the Reserve Bank of Australia's (RBA) Board meeting.
In overseas markets yesterday, dollar-yen briefly fell to around ¥158.43, but the move was short-lived and the pair recovered to ¥159.36. Some market participants attributed the rebound to the absence of additional yen-buying intervention and increased short-term selling of the yen and buying of the dollar.
The Tokyo market is expected to trade in a narrow range today due to the domestic market holiday, but attention is focused on the actions of the Japanese authorities as the yen continues to weaken on its own. The RBA Board will announce its interest-rate decision at 1:30 p.m., and the Australian dollar could become significantly more active depending on the wording of the statement.
Given the backdrop of fiscal policies and investment in the United States that support yen depreciation, the yen's weakening trend could return even after intervention is halted. However, with expectations of a Bank of Japan rate hike in September already being priced into the market, there is also a risk that any renewed intervention could again prove short-lived.
Depending on the RBA Board's decision, the key question will be whether it maintains its hawkish stance even if a slowing trend in inflation is indicated. This could trigger significant movement in the Australian dollar.