Yen surges to three-month peak, dollar pares losses after intervention

By Chibuike Oguh

NEW YORK Aug 3 (Reuters) - The yen strengthened against the dollar and euro on Monday as investors watched for signs of further intervention after Tokyo and Washington stepped into the foreign exchange markets last week to support Japan's currency.

Japan and the U.S. conducted coordinated yen-buying intervention and will not hesitate to take further action, Japan's Finance Ministry said on Monday.

The Japanese currency was last up 0.18% at 157.05 per dollar, remaining at its strongest level in about three months.

"It became clear by Friday that there was an intent, and more, of an announcement of the U.S. actually working together with the Japanese to intervene in the FX," said Juan Perez, director of trading at Monex USA.

"The main thing is trying to understand how likely this is going to happen again because these operations are also expensive."

Japan may have spent as much as $36.58 billion to ​buy yen in the latest action aimed at strengthening the ‌currency, central bank data indicated on Monday. That brings the total amount spent on its two FX interventions this year to more than $100 billion.

The yen also advanced against other currencies such as the euro and sterling, stirring speculation that Japanese authorities could be in the market again.

"I've mentioned it many times that the next step is for the U.S. Treasury to get involved and Scott Bessent actually hinted at it some time ago that they would be supportive of Japan," said Eugene Esptein, head of structured products for Moneycorp North America.

"They've finally gotten involved. But will they do it again? The Bank of Japan spends substantially more doing this as they should. But the risk here is that treasuries are being sold to fund these transactions and I don't know what part of the curve they're selling. They just have to be careful of the mechanics of this because they could just push bond yields higher."

Against the euro, the yen rose 0.45% to 180.78, after earlier touching 179.435, its strongest level since mid-November 2025.

The yen has been under pressure for years, undermined by the Bank of Japan's gradual approach to monetary policy tightening, which has kept yield differentials wide between Japan and the rest of the world.

Bank of America analyst Shusuke Yamada said the coordinated action by Japan and the United States could challenge the market view that foreign exchange intervention has little long-term effect.

"The view that FX intervention cannot have a lasting impact and merely alters short-term market flows seems right in many cases. However, depending on the circumstances and broader context, intervention can exert a significant influence on the market, and trigger an inflection," Yamada said in an investor note.

DOLLAR INDEX PARES LOSSES

The dollar index, which measures the U.S. currency against a basket of major peers, edged higher as it recouped some losses after recent yen gains that followed the intervention.

The index was up 0.25% at 99.97, on track to snap four straight sessions of losses.

The euro was down 0.11% against the dollar at $1.15085, after hitting a fresh 1-1/2-month high at $1.1559.

An easing of geopolitical tensions typically weighs on the dollar while supporting the euro and yen, as safe-haven demand fades and concerns over energy-exposed economies recede.

The Federal Reserve Bank of New York sold euros for yen on behalf of the Treasury through two banks, the Financial Times reported.

Analysts also said the U.S. Treasury's reported decision to intervene through the euro was to avoid signalling a desire for broad-based dollar weakness.

The euro strengthened 0.18% against the Swiss franc to 0.9326. Sterling weakened 0.39% to $1.3429.

(Reporting by Chibuike Oguh in New York; Additional reporting by Stefano Rebaudo; Editing by Jamie Freed, David Holmes and Rod Nickel)