US dollar to retain strength, yen intervention no game changer: Reuters poll

The U.S. dollar is expected to maintain its strength in the coming months, with a potential decline towards the end of the year, according to a Reuters poll of FX strategists. The yen saw a 4% rally against the dollar due to interventions from Tokyo and coordinated action with Washington, but failed to regain the peak from a previous intervention in May.

Around 95% of respondents believed that future Japanese currency interventions alone would not be sufficient to curb the currency's weakness, suggesting that the Bank of Japan would need to raise interest rates for sustained impact. The Bank of Japan has been hesitant to raise interest rates more frequently than every six months due to a weak economy.

If the U.S. economy continues to perform well, the Federal Reserve might need to raise interest rates sooner to combat inflation pressures from the U.S.-Israeli conflict with Iran. The euro is projected to remain around $1.15 in the next three months, strengthen by 1% to $1.16 by end-January, and reach $1.18 in a year. Nearly half of the respondents forecasted that current long-dollar positions would remain unchanged by end-August, while 22 expected a decrease, and six anticipated an increase.

Despite the Bank of Japan's recent interventions, history suggests that without a change in underlying fundamentals, their impact fades relatively quickly.