The yen steadied on Tuesday after a sharp drop in the previous session as the joint U.S.-Japan intervention failed to deliver a lasting boost. The yen firmed to 158.93 per U.S. dollar in Asian hours, but remained further away from the three-month high of 155.20 hit last week in the wake of the rare U.S.-Japan yen-buying intervention at the end of July.

Market Reaction

Speculators slashed their bearish bets on the Japanese yen by the most in over 12 years, with data from a U.S. regulator showing the net short position in the yen fell by $8.865 billion to $3.604 billion in the week to August 4. However, analysts suspect that speculators will use the opportunity to rebuild their short positions.

The path ahead may remain choppy, with a move back to 160.0 at some point this month remaining a tangible risk, even if September ends up delivering both a Bank of Japan hike and a hold from the U.S. Federal Reserve. Traders are pricing in just a shade over 50% chance of a rate hike from the BOJ, according to LSEG data.

Australian Dollar

The Australian dollar was at an eight-week high ahead of a policy decision from the country’s central bank. The RBA is expected to keep its policy rate unchanged, with the focus on comments from policymakers. The Aussie stood at $0.7057.

The RBA is likely to emphasize that inflation remains elevated and that it is prepared to raise the cash rate again if required. The ongoing conflict in the Middle East could encourage further cost pass-through to consumer prices in Q3 2026. However, softer inflation and the weakness in the housing market give the RBA scope to assess the lagged effects of earlier tightening.

Original reporting: Appleton, WI News Feed (HLL/CB) — read the source article.