The US dollar remained broadly stable during today’s trading, while the Japanese yen continued to dominate activity in the currency market following coordinated intervention by Washington and Tokyo to halt the sharp decline in the Japanese currency. Although the yen weakened against the dollar to 157.76, it remained well away from the 164 level recorded before the intervention, which marked its lowest point in nearly four decades. US Treasury Secretary Scott Bessent confirmed that the United States had participated in yen purchases alongside Japan, marking the first coordinated operation between the two countries since 2011 and the first direct US intervention to strengthen the yen since 1998.
The US decision reflects concerns extending beyond the Japanese economy. A continued decline in the yen could increase the cost of imports into Japan, create greater instability across Asian markets and encourage Japanese investors to reassess their overseas holdings, particularly US Treasury securities. Japan is the largest foreign holder of US government debt, which means Washington views sharp movements in the yen as a potential risk to the bond market and the cost of financing American debt.
US participation also gives the intervention greater strength than a unilateral move by Japan. American support reduces the limitations associated with available foreign exchange reserves and increases the ability of monetary authorities to confront speculative pressure for a longer period. Plans to use the Federal Reserve FIMA Repo Facility indicate that both countries are preparing to secure the dollar liquidity required for future operations while limiting the risk of wider disruption across currency and bond markets.
These measures are likely to place a firmer ceiling on further gains in the dollar against the yen. Any renewed upward movement in the currency pair may remain limited as long as Washington and Tokyo maintain their readiness to intervene again. Meanwhile, the US Dollar Index held near 99.88 after facing heavy pressure during the previous week due to intervention in the yen market and uncertainty surrounding the direction of US interest rates.
Long positions in the dollar have eased after reaching elevated levels ahead of the Federal Reserve meeting in July. Investor positioning is now more balanced than it was a week earlier, suggesting that additional losses in the US currency would require weaker economic data or a clear shift in monetary policy expectations. US manufacturing figures were stronger than forecast, particularly the employment component, reducing market expectations for interest rate cuts at upcoming Federal Reserve meetings.
US job openings declined to 7.359 million in June, compared with expectations of 7.454 million, while the May reading was revised lower. Although the figures missed forecasts, they did not point to a severe deterioration in the labor market. Hiring, resignations and layoffs remained broadly stable, giving the Federal Reserve more room to focus on inflation rather than moving quickly to support employment.
The task facing the US central bank has become more difficult as energy prices remain volatile. A renewed rise in oil prices could revive inflationary pressure, while lower prices may strengthen the case for interest rate cuts. Markets are awaiting the July nonfarm payrolls report, which is expected to have a direct influence on interest rate expectations and the direction of the dollar. Elsewhere in currency markets, sterling rose to 1.3450 dollars and the euro advanced to 1.1531 dollars, although their gains remained limited as the US currency regained some stability.
Oil prices extended their decline for a second consecutive session after official comments pointed to progress in negotiations aimed at easing the conflict between the United States and Iran and reopening the Strait of Hormuz. US officials believe an agreement could be close, while Qatar continues its mediation efforts with a focus on reducing tensions and restoring shipping through the strait. Reports also indicated that an initial draft of a possible agreement had been prepared and circulated among the parties, although no arrangements for direct talks have yet been reached.
These developments pushed oil prices down by 5.7 percent to 75.80 dollars per barrel as the risk premium associated with possible supply disruptions declined. Lower crude prices help ease inflationary pressure in the United States and Europe, but they also weigh on the currencies of major energy exporting countries, particularly the Canadian dollar.
The Canadian dollar fell by 0.2 percent against the US currency to 1.4070 Canadian dollars per US dollar, despite Canada recording a trade surplus for a fourth consecutive month. The trade surplus reached 3.86 billion Canadian dollars in June, its highest level in four years and above analysts’ expectations of 3 billion Canadian dollars. The weaker local currency increased the Canadian dollar value of export revenues, while the recovery in exports supported economic activity during the second quarter. Preliminary estimates indicated annualized growth of 3.4 percent.
However, the continuation of this improvement is not guaranteed after the United States imposed new tariffs on Canadian goods worth nearly 20 billion dollars. The measures could restrict export growth in the coming months. Canada’s manufacturing sector also expanded at its fastest pace in more than four years, supported by stronger domestic demand, higher production and increased new orders. Weak international demand, however, continues to raise concerns about the sustainability of this growth.
Overall, market movements suggest that the US dollar is regaining a degree of balance, while the yen continues to receive support from coordinated intervention by the United States and Japan. The Canadian dollar, meanwhile, remains under direct pressure from falling oil prices despite stronger domestic trade and economic data.
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