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Yen steadies near 159 per USD as holiday liquidity limits moves

USD/JPY had nearly a 1.0% gain the prior session and is testing officials’ resolve after the yen retraced about half of the intervention-driven rally.

Reported · Written up by our desk · Major Pairs

USD/JPY traded in a tight range around 159.30 during Asian hours on Tuesday, with movement limited by thin liquidity after Japanese markets closed for the Mountain Day holiday, FXStreet reports.

The yen’s recent intervention-driven rally has since retraced roughly half of its gains, a setup that keeps focus on whether officials in Tokyo and Washington will further support the currency. A Reuters analyst said Japan’s decision not to follow through on its joint intervention, including by failing to amplify US Dollar weakness after soft US jobs data, points to a passive approach to slow the dollar’s rise rather than reverse the yen’s multi-year decline.

With investors still positioned heavily short yen, holding the largest net-short positions since early 2024, analysts said the reduced holiday liquidity could create a strategic window for another intervention. Separate reporting from Jiji Press also suggested the Bank of Japan may consider another interest rate increase at its September 17–18 meeting to address inflation risks tied to AI-related demand, yen depreciation, and higher crude oil prices.

Markets are now pricing a roughly 50% chance of a 25 basis point BoJ hike in September, and a full hike by year-end, according to BNY’s Wee Khoon Chong, while the dollar faces headwinds from weaker-than-expected July payrolls. FXStreet also noted that softer US labor data has shifted expectations toward a more dovish Fed, reintroducing two-sided policy risk into the pair.

Latest closeWTI crude $82.30 ▲5.3%|USD/JPY 159.27 ▲0.5%

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