Singapore/London: The Japanese yen weakened slightly on Tuesday but retained most of its recent gains, as traders remained cautious after last week's rare coordinated currency intervention by Japan and the United States.The yen was trading at 157.8 per US dollar, down 0.4% on the day. However, it remained significantly stronger than the 40-year low of 163.99 per dollar reached in July and well above Monday's three-month high of 155.20.The currency has surged about 5% over the past three trading sessions after Japan confirmed that it carried out joint yen-buying intervention with the United States on Friday, an unusual move aimed at supporting the Japanese currency.Lee Hardman, Senior Currency Analyst at MUFG, said intervention may help stabilise the yen in the short term but is unlikely to reverse broader market trends without support from economic fundamentals."While joint intervention may prove more effective at helping to provide support for the yen in the near term, we still believe that it can only buy time," he said."There will need to be a change in fundamentals as well to encourage a sustainable reversal of the yen weakening trend that has been in place over the last five years."Market participants continue to focus on the wide interest-rate gap between Japan and the United States, which has been a major driver of yen weakness.According to Reuters sources, the US Treasury bought yen using euros during last week's intervention rather than selling dollars directly, an unusual approach that may have been intended to strengthen the yen without creating the impression that Washington is pursuing a weaker dollar policy.Against the euro, the yen slipped 0.5% to 181.62, after reaching a near nine-month high of 179.44 during the previous session.Monday's sharp movement in the currency also fuelled speculation that Japanese authorities may have intervened again, although no official confirmation was provided.Analysts at Citi estimated that trading volumes in the dollar-yen market reached approximately $27 billion during early Monday trading, significantly higher than the recent average of around $1.9 billion.Bank of America strategists noted that the 155 yen-per-dollar level could become a key support threshold, as it also served as a floor during previous intervention efforts in April and May.Dollar steadies after recent lossesThe US dollar recovered some ground on Tuesday after weakening in recent sessions following the intervention and a decline in oil prices.Market sentiment has also been influenced by developments in the Middle East.US President Donald Trump said on Monday that talks with Iran were underway and described the negotiations as Tehran's "last chance" to secure a favourable agreement to end the five-month conflict. Iran, however, denied that any negotiations were taking place or had been planned.The euro traded largely unchanged at $1.151, after touching a one-and-a-half-month high of $1.156 on Monday.Sterling stood at $1.343, while the US Dollar Index rebounded to 100 after previously falling to a one-and-a-half-month low.The Australian dollar gained 0.3% to $0.702.Focus turns to US jobs reportInvestors are now looking ahead to a series of US labour market indicators, culminating in Friday's closely watched nonfarm payrolls report.Joseph Capurso, strategist at Commonwealth Bank of Australia, said the employment data will play a significant role in shaping expectations for future Federal Reserve policy."This week's nonfarm payrolls for July is a key input into the timing of the eventual tightening cycle," he said.Financial markets are currently pricing in approximately 35 basis points of Federal Reserve rate hikes by December, making upcoming employment data a critical factor for currency and interest-rate expectations.
