The yen hit an almost four-week high against the US dollar on Friday (Jul 12), raising speculation that Japanese authorities may have intervened for a second day to prop up the currency.
The rally in the Japanese currency, which has been languishing at around 38-year lows, began on Thursday just after data showed US consumer prices for June eased, boosting the odds of the Federal Reserve cutting rates as soon as September.
On Friday, the move came after data showed that US producer prices increased moderately in June. The dollar fell as much as 1 per cent to a one-month low of 157.30 yen, but pared some of those losses to trade down 0.55 per cent at 158.01 yen.
“If they intervened yesterday, it makes it likely that they intervened today. And I think it’s good strategy to keep the market off balance,” said Steve Englander, head of global G10 FX research and North American macro strategy at Standard Chartered Bank NY Branch.
Englander added, however, that “it could also be stops”, referring to the closure of positions betting against the yen, following losses.
Daily operations data from the BOJ on Friday suggested the central bank had spent between 3.37 trillion (S$25.48 billion) and 3.57 trillion yen on buying the yen on Thursday, less than three months after its last foray into the market.
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James Malcolm, head of FX strategy at UBS in London, said Friday’s move may have been the result of an intervention or of rate checking. The Bank of Japan sometimes calls dealers to ask for rate levels, which can indicate a potential intervention and itself causes market moves.
“They need to change tactics to keep the market on its toes and show they are serious. Looks like yesterday didn’t cost them much. So this may ensure we close the week near the lows, which will put further technical pressure on the (dollar-yen) cross,” he said.
Traders are now pricing in a 94 per cent chance of the Fed cutting rates in September, compared with 73 per cent before the Consumer Price Index reading, the CME Group’s FedWatch Tool showed.
The dollar index, which measures the US currency against six others, fell 0.24 per cent to 104.09 and reached 104.04, the lowest since June 7.
The euro was up 0.36 per cent at US$1.0904 and reached US$1.0911, the highest since June 4.
Sterling strengthened 0.59 per cent to US$1.2985 and hit a one-year high of US$1.299.
In cryptocurrencies, bitcoin gained 1.33 per cent to US$58,324.00. Reuters
