The Japanese yen rose in Asian trading on Tuesday against a basket of major and minor currencies, moving into positive territory against the US dollar and pulling away from ten-month lows, supported by bargain-hunting and ongoing speculation that authorities may intervene to support the currency.

With the chances of a Bank of Japan rate hike in December still weak, investors are awaiting further clues on the path of policy normalization heading into the new year.

Price Overview

USD/JPY fell more than 0.2% to 156.56 yen, down from an opening level of 156.91, after touching a high of 156.98.

The yen ended Monday down 0.4% against the dollar, following a 0.7% gain on Friday as it recovered from last weeks ten-month low at 157.89.

Japanese Authorities

Takuji Aida, a member of a key government advisory panel from the private sector, said on NHK TV on Sunday that Japan is capable of intervening effectively in the currency market to offset the negative economic impact of a weak yen.

Finance Minister Satsuki Katayama said on Friday that FX intervention remains an option to counter excessive volatility and speculative moves, keeping traders on alert for potential yen-buying action by Japanese authorities.

Views and Analysis

Nick Rees, head of macro research at Monex Europe, said intervention could help slow the dollars rise against the yen but is unlikely to fully reverse it, given that the underlying drivers are not expected to change soon.

Matthew Ryan, head of market strategy at Ebury, said USD/JPY is not far from levels that could trigger direct intervention, with 160 seen as a key threshold for authorities.

Some market analysts believe official interventionsimilar to last year and 2022remains possible. Traders expect potential action between 158 and 162 per dollar, though few expect it to be highly effective.

Japanese Interest Rates

Market pricing for a 25-basis-point rate hike by the Bank of Japan in December remains around 35%.

Investors await upcoming data on inflation, unemployment, and wage growth to reassess those odds.