Key facts
- The yen stabilized near 160 per dollar as the impact of U.S.-Japan intervention faded.
- The Australian dollar held near an eight-week high after the RBA kept rates unchanged.
- Speculators significantly reduced their bearish positions on the yen.
- The Bank of Japan is expected to maintain its accommodative monetary policy, with a slight chance of a rate hike.
- Upcoming U.S. economic data, including CPI, PPI, and retail sales, are closely watched.
The Japanese yen stabilized near the 160 per dollar level as the impact of a joint U.S.-Japan intervention began to fade. Despite the intervention, which followed the yen hitting a 40-year low, nearly half of the gains have been erased, leading analysts to suspect speculators may rebuild short positions. Trading volumes were thinner due to a Japanese holiday.
Analysts suggest the market is testing the resolve of Japanese and U.S. officials, with a risk of the yen moving back towards 160.00 this month, even with potential Bank of Japan rate hikes and a Federal Reserve hold. Traders are pricing in slightly over a 50% chance of a Bank of Japan rate hike.
Attention is also focused on the Reserve Bank of Australia's policy decision, where rates are expected to remain unchanged. Policymakers are anticipated to emphasize that inflation remains elevated and that they are prepared to raise rates if necessary. The Australian dollar stood at $0.7057.
The U.S. dollar remained steady against most major currencies, influenced by oil prices and upcoming U.S. economic data, including consumer price index figures, producer price data, and retail sales.