Yen nears 160 as intervention risk returns

Summary

The yen weakened to around 159.4 per US dollar, approaching the 160 level that could prompt further intervention after earlier action by Japan and the US failed to sustain its recovery. European stock futures pointed modestly higher, with FTSE 100 futures gaining slightly. Oil prices remained under pressure after weaker global demand forecasts, while reduced expectations for a September Federal Reserve rate increase continued to influence currency markets.

Equities

The FTSE 100 fell 0.6% on Thursday to close at 10,772.67, its fourth consecutive decline and lowest finish since 27 July. The FTSE 250 performed better, rising 0.1% to 24,837.71. UK GDP increased by 0.3% in June after being flat in May, although the stronger-than-expected figures had little impact on sterling or near-term interest rate expectations.

Antofagasta fell 6.8% on Thursday after cutting its 2026 copper production forecast following a July shutdown at its Los Pelambres mine. The weakness spread across major miners, with Rio Tinto down 4.8% and Anglo American falling 3.5%, while both the industrial metals and precious metals mining sectors lost more than 3%.

Savills jumped 10.9% on Thursday after the property group reported a 47% increase in first-half underlying profit, helped by stronger North American and transactional businesses. Costain gained 4.6% after publishing upbeat half-year results.

In the US, the S&P 500 closed at a record high on Thursday, rising 0.65% to 7,798.99. The Nasdaq gained 0.81% to 26,803.03, while the Dow Jones Industrial Average added 0.13% to finish at 53,839.99.

Technology shares included some of the strongest moves. Sandisk surged 13.7% on Thursday and Micron Technology climbed 4.2%, while Meta Platforms rose 2.8% and Microsoft gained almost 1%. Cisco Systems moved sharply in the opposite direction, dropping 8.4% after its upbeat revenue forecast failed to meet investors’ expectations.

Tapestry plunged more than 16% on Thursday after the Coach owner forecast muted annual revenue growth. Netflix climbed 5.4% after billionaire investor Bill Ackman disclosed a new holding in the streaming company, while HP gained 6.9% and Dell Technologies rose 2.1% following better-than-expected quarterly results from Lenovo. US producer prices were unchanged in July, while traders put the probability of the Federal Reserve leaving rates unchanged in September at 63%.

Forex & Commodities

The US dollar was broadly steady early on Friday as softer US economic data reduced expectations for another Federal Reserve interest rate increase. The euro edged down to $1.154, while the British pound held at $1.350 and the Australian dollar traded at $0.7065.

The Japanese yen strengthened slightly early this morning to around 159.3 per US dollar after news that the Bank of Japan could raise interest rates as soon as September. However, the currency has given back roughly half of the gains made following coordinated US and Japanese intervention in late July and early August.

Expectations for Japanese monetary policy have shifted sharply, with markets now pricing a 76% probability of a Bank of Japan rate increase in September, compared with 24% at the end of July. The central bank is also considering increasing the pace of subsequent rate rises after tightening roughly twice a year since ending its long-running stimulus programme in 2024.

In the US, producer prices were unchanged in July following a revised 0.1% decline in June, while consumer prices rose only slightly last month. These figures, together with the recent unexpected decline in US non-farm payrolls, have reduced the probability of a September Federal Reserve rate increase to around 33%, from about 55% last week.

Spot gold fell early this morning to $4,324 an ounce after reaching its highest level since 5 June on Thursday. The precious metal was heading for a weekly decline as investors took profits following its recent rise.

Oil prices edged higher early on Friday, with Brent crude at $87.08 a barrel and US West Texas Intermediate at $81.31. Both benchmarks remained on course for weekly gains of around 4%, despite falling more than 2% on Thursday, as the US threatened to maintain its naval blockade of Iran indefinitely while Iranian restrictions continued to affect traffic through the Strait of Hormuz.