The yen surged on Wednesday, which analysts suspect may be due to Japanese officials intervening to support the struggling currency from multi-decade lows.
Recently, the yen experienced significant movements, notably rising sharply on Thursday and Friday from 38-year lows of 161.96 per dollar.
These abrupt increases suggest potential currency intervention, according to market participants.
Bank of Japan data released on Tuesday hinted that Tokyo might have spent 2.14 trillion yen ($13.5 billion) on intervention last Friday.
Combined with Thursday’s estimated spending, Japan is believed to have bought nearly 6 trillion yen last week to bolster the currency.
Karl Schamotta, chief market strategist at Corpay in Toronto, commented, “The fact that the move is bigger than it is elsewhere seems like it points to intervention of some sort, but the timing doesn’t really make sense, it seems to be coming out of the blue as opposed to triggered by a move in volatility or a move in the spot rate.”
He added that traders might be reacting quickly, considering the Bank of Japan’s potential involvement, but it’s uncertain if actual intervention occurred as there is no supporting flow data.
Some market participants also attributed the dollar’s weakness to comments from Republican Presidential nominee Donald Trump regarding the dollar’s recent strength in a Bloomberg interview.
The dollar weakened 1.12% against the yen, settling at 156.56 after dropping to 156.09, the lowest since June 12.
Japan’s Ministry of Finance did not comment, but top currency diplomat Masato Kanda noted the need to respond if speculators caused excessive moves and indicated there were no limits to intervention frequency, according to Kyodo News.
The dollar index, which tracks the greenback against a basket of currencies, fell 0.38% to 103.80. Comments from Federal Reserve officials suggested the central bank might soon cut interest rates.
Although the markets see a slim chance for a rate cut at the Fed’s July meeting, there’s a 96.2% chance for September, per CME’s FedWatch Tool.
The euro rose 0.32% to $1.0932 ahead of the European Central Bank’s Thursday meeting, where rates are expected to remain steady.
Sterling gained 0.39% to $1.3016, hitting a one-year high of $1.3044 due to higher-than-expected UK inflation, decreasing the likelihood of a rate cut from the Bank of England.
UK headline inflation remained at 2% annually in June, against forecasts of a 1.9% increase, with services inflation at 5.7%.