By Chuck Mikolajczak
NEW YORK (Reuters) – The yen rose sharply on Wednesday, raising speculation about further intervention by Japanese officials to support the currency, which has been at a multi-decade low.
The yen has seen some wild swings in recent days, rising sharply from a 38-year low of 161.96 to the dollar on Thursday and Friday. Market participants saw the sudden gains as signs of currency intervention.
Bank of Japan data released Tuesday suggested Tokyo may have spent 2.14 trillion yen ($13.5 billion) on intervention on Friday. Including the estimated amount spent on Thursday, Japan is suspected to have bought almost 6 trillion yen through intervention last week.
“The fact that the move is bigger than elsewhere suggests some kind of intervention, but the timing doesn’t make sense. It seems to have come out of the blue and not been triggered by a change in volatility or spot,” said Karl Schamotta, chief market strategist at Corpay in Toronto.
“We are potentially in a situation where traders are getting impatient, given that the Bank of Japan is in the background and is exacerbating the fundamentals. However, in the current environment, it is difficult to say whether there is any intervention; we do not see any flow data that would suggest that there is intervention at this point.”
Market participants also cited Republican presidential candidate Donald Trump’s comments on the dollar’s recent strengthening in an interview with Bloomberg published Tuesday as a possible reason for the greenback’s weakness.
Against the Japanese yen, the dollar weakened 0.32% to 156.25, after falling to 156.09 – a level not seen since June 12.
Japan’s Finance Ministry did not respond to requests for comment. Japan’s top currency diplomat Masato Kanda said it would have to respond if speculators triggered excessive movements and there was no limit to how often authorities could intervene, Kyodo News reported.
The index, which measures the U.S. dollar against a basket of currencies, also weakened on the day, falling 0.43% to 103.76 after hitting a four-month low of 103.64, as comments from several Federal Reserve officials indicated the central bank was inching closer to cutting interest rates.
The Federal Reserve’s “beige book” of economic activity showed a slight to moderate pace of expansion from tardy May to early July, with companies reporting some signs of continued weakness in the labor market.
Markets see only a slim chance of a rate cut of at least 25 basis points (bps) at the Federal Reserve’s July meeting, but are already factoring in a September cut, according to CME’s FedWatch Tool.
The euro rose 0.37% to $1.0937 ahead of Thursday’s European Central Bank (ECB) meeting, where interest rates are widely expected to remain unchanged. The main focus will be comments from President Christine Lagarde, who is expected to hint at the timing of the next rate cut after June’s 25 basis point cut.
The pound rose 0.32% to $1.3006 and hit a one-year high against the dollar at $1.3044 after data showed U.K. inflation rose slightly more than expected, weakening the chances of the Bank of England cutting interest rates at its upcoming meeting.
Core inflation was 2% year-on-year in June, compared with a forecast raise of 1.9%, while closely watched services inflation came in at 5.7%.
In cryptocurrencies, bitcoin fell 0.21% to $64,556.03. fell 0.56% to $3,420.38.
