The Japanese yen has slipped back through the 160-per-dollar threshold, extending its recent decline as more than half of the gains from the last round of currency intervention have now been erased.

After Federal Reserve Chair Kevin Warsh pledged to bring inflation back to the central bank's target, the dollar gained momentum, dragging the yen down as much as 0.4% to 160.01 against the greenback. Traders are now closely monitoring the yen's level to gauge when Japanese authorities might step in to support their currency.

On July 31, the U.S. and Japan conducted their first joint yen-buying operation since 1998, which briefly strengthened the currency. However, the yen failed to break through the 155 zone earlier this month and has been under sustained pressure ever since.

Masahiko Loo, senior fixed income strategist at State Street Global Advisors, noted that "above 160 is no longer just a valuation level; it's becoming a policy level. Washington and Tokyo have effectively drawn a political red line around the mid-160s." He added, "We cannot rule out another round of currency intervention before the Bank of Japan's rate hike, which could come as early as September."

Since the last joint U.S.-Japan intervention, hedge funds have cut their short positions on the yen by more than half. Still, market watchers say some investors are beginning to rebuild carry trades using the yen as a funding currency.