Dollar Holds Firm Despite Joint US-Japan Yen Intervention, Pressuring Pound

The British pound and euro weakened on Monday as the U.S. dollar held firm, showing surprising resilience despite a rare, coordinated intervention by U.S. and Japanese authorities to support the yen.

At 3:55 AM ET, the GBP/USD currency pair was down 0.15% to 1.3462, while the EUR/USD slipped 0.03% to 1.1526.

Dollar Defies Intervention Pressure

The dollar's stability came even after U.S. and Japanese officials confirmed they had jointly sold an estimated $70 billion to $80 billion over the past three days to bolster the struggling Japanese currency. This coordinated action, combined with softer oil prices, led some analysts to expect a weaker dollar.

"In theory, the dollar should be weaker across the board today," noted Chris Turner, Global Head of Markets at ING, in a comment cited by the source. However, the dollar's strength is anchored by persistent market expectations for another interest rate hike from the Federal Reserve, which continues to be the dominant driver in currency markets.

Fed Focus Shifts to U.S. Jobs Data

Market pricing for a September Fed rate hike has rebounded to between 16 and 17 basis points after briefly dipping below 10 basis points last week, the source reported. This hawkish sentiment is reflected in U.S. bond markets, with the 30-year Treasury yield holding above 5.20% and 30-year mortgage rates at 6.75%.

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The Fed's next policy move will likely be determined by a slate of key U.S. employment figures due this week:

• JOLTS job openings on Tuesday
• ADP employment report on Wednesday
• Non-Farm Payrolls (NFP) on Friday

Market consensus for Friday's NFP report is for the creation of 75,000 to 80,000 new jobs. According to ING's analysis, this figure "may not be soft enough to take a Fed hike off the table." The bank suggested a reading below 50,000 would be a more significant threshold to alter the dollar's bullish outlook.

Sterling and Euro Weaken

The pound's decline was largely a consequence of the dollar's broad strength, with no major domestic catalysts in the U.K. on Monday. ING analysts view support for the Dollar Index (DXY) around 99.35-99.40 and see a potential re-test of the 100 level this week, which could exert further pressure on the pound.

The euro's underperformance was notable given what ING described as a favorable backdrop of solid eurozone data and lower oil prices. Analysts at the bank speculated that the U.S. Treasury may have been selling the EUR/JPY cross from its Exchange Stabilisation Fund—which holds about $13 billion in euro reserves—to avoid the political optics of directly selling U.S. dollars.