Yen slips as intervention threat persists, US dollar steady

The Japanese yen experienced a decline on Monday (Sep 21) as traders remained cautious of potential currency intervention, following a volatile week. Central banks' rate hikes and hawkish signals contributed to the strengthening of the US dollar. With Japanese markets closed for a three-day holiday, liquidity was low, prompting traders to remain vigilant.

The US dollar rose 0.2% against the yen, reaching 157.20 yen. The Bank of Japan (BOJ) increased rates to their highest level in 31 years, at 1.25%, but dissenting votes and a lack of hawkish guidance deterred investors from buying the currency. Following the decision, the yen initially dropped sharply before a slight recovery, as Japanese officials conducted rate checks, often a precursor to currency intervention.

Analyst Lee Hardman noted that the rate check should help reduce expectations of how much the yen will weaken in the near term. The dollar index remained steady at 100.23 after a 1% gain last week, following the Fed's rate hike. There is a 55% chance of a Fed rate hike at their October meeting, up from 43% a week prior. The euro remained relatively unchanged at $1.149 after the far-right Alternative for Germany party won the first place in state elections in northeastern Germany.