FOREX-Yen climbs for third straight session with traders on alert for intervention

The yen rose for a third consecutive session, with traders on high alert for further intervention after Tokyo and Washington's coordinated support last week.

The yen rose for a third straight session on ‌Monday, ​keeping traders on alert for further intervention after Tokyo and Washington stepped into the foreign exchange market last week to support Japan's currency.

Meanwhile, oil prices sank more than $4 a barrel after U.S. President Donald Trump held back from a fresh attack on ‌Iran, undermining support for the safe-haven greenback. Iran said it is not currently holding talks with the United States. Rising energy prices are expected to weigh more heavily on the economies of the euro zone and Japan, both large energy importers, while the United States is seen as relatively insulated from oil shocks.

Japan and the United States conducted coordinated yen-buying intervention and will not hesitate ‌to take further action, Japan's finance ministry said on Monday. TRADERS ON ALERT FOR INTERVENTION

The yen also advanced against other currencies like the euro and sterling, stirring speculation Japanese authorities could ‌be in the market again. “Dollar/yen 1.5-2 standard deviations above the long-term trend have been a useful guide for identifying when intervention risk enters the danger zone,” said Stephen Spratt, APAC developed markets rates strategist at Societe Generale.

“Currently this (level) is 162.72-164.96 area,” he added. The Japanese currency rose 1% in the Asian morning to a high of 155.20 per dollar, its strongest level in about three months, before paring some gains. It was last ⁠up 0.45% ​at 156.65.

"A substantial build-up of short yen positions ⁠had occurred, and the unwinding of these positions tends to accelerate yen appreciation,," Hirofumi Suzuki, SMBC's chief forex strategist, said of Monday's move. The yen's jump followed a more than 3% surge over two trading sessions at the end ⁠of last week. Japan's finance ministry confirmed it had engaged in joint yen-buying intervention with the U.S. on Friday, while Bank of Japan data showed Tokyo may have bought as much as $58.97 billion ​worth of yen on Thursday.

The yen has been under pressure for years, undermined by the BOJ's gradual approach to monetary policy tightening, which has kept yield differentials wide ⁠between Japan and the rest of the world. Barclays analysts argued that even if the yen were to strengthen further in the near term, longer-term downward pressures remain in place.

Goldman Sachs strategist said that outside of a change in either ⁠the ​policy mix or global growth outlook, encouraging repatriation would be the most powerful policy for influencing the currency over a long period of time. Market participants worried that Japan's expansionary fiscal policy could weigh on the currency.

EURO/DOLLAR UNCHANGED DESPITE DROP IN OIL PRICES The dollar index was little changed at 99.79, having slid more than 1.5% last week. The euro ⁠was up 0.03% at $1.1525, after hitting a fresh 1-1/2-month high at $1.1559 in Asian trade.

"The fact that the dollar is not broadly weaker probably owes to the unresolved issue of ⁠whether the Federal Reserve will hike in September," said ⁠Chris Turner, global head of forex at ING, after arguing that the drop in oil prices should weigh on the greenback. "It seems the only way the Fed can avoid hiking in September is if the U.S. data is poor enough," he added, recalling that ‌a major input to that ‌decision comes this week in the form of jobs data.