Investing.com– The Japanese yen rose sharply on Thursday evening, with the USDJPY pair falling to its lowest level in almost a month amid speculation about potential government intervention in the currency market.

The yen also gained on weaker-than-expected consumer price data that surprised the US and on rising expectations that the Federal Reserve will cut interest rates in September.

The pair, which measures the amount of yen needed to buy one dollar, settled at 159 in early Friday trading after falling more than 2% on Thursday. The pair traded near 38-year highs of 162 yen earlier this week.

Traders expected the USDJPY rate to reach 162, which would be the limit for government intervention.

The pair’s keen decline has raised speculation that the Japanese government has intervened in currency markets. Chief currency diplomat Masato Kanda, who led an earlier yen intervention, has given no indication whether the government has intervened this time.

Local media reports that the Bank of Japan has carried out a review of the yen’s exchange rate against the euro, which could be a prelude to intervention in the currency market.

The yen has weakened significantly over the past month, and a series of faint economic data in Japan has increased concerns that the Bank of Japan will not have much room to tighten monetary policy further this year.

The BOJ raised interest rates for the first time in 17 years in March, taking them out of negative territory. But the move did not provide much support for the yen.

Moderate inflation and faint business activity data, coupled with a keen downward revision to first-quarter gross domestic product data, contributed to doubts about the Bank of Japan and a weakening yen.

But the biggest pressure on the yen has been high U.S. interest rates, which have kept the dollar in good shape. Still, that notion now seemed to be fading as investors positioned themselves for a September rate hike, especially after faint consumer price inflation data on Thursday.