Yen volatile on intervention fears

12 Jul 2024 , 09:25 AM

The yen fluctuated between losses and gains in tumultuous trading on Friday, showing investors’ trepidation after Tokyo was perceived to have intervened to support the Japanese currency in the aftermath of a lower-than-expected US inflation report.

The yen’s moves against the dollar and other major currencies dominated the market on Friday, although Asian markets applauded increased bets on the Federal Reserve cutting interest rates in September.

The dollar was last down 0.05% at 158.79 yen, after rising more than 0.3% to an intraday high of 159.45 yen and plunging 0.7% to a low of 157.75 yen during the early Asian session on Friday.

The other yen crosses moved similarly turbulent, with the euro up 0.02% against the yen and sterling up 0.1%, both erasing early losses against the Japanese currency.

On Thursday, the yen rose about 3% against the dollar intraday, prompting speculation that Japanese authorities had intervened in the currency market to support it.

Local media ascribed the move to a round of official buying from Tokyo to support a currency that has been near 38-year lows, but authorities, as usual, declined to provide any suggestions.

Those forecasts were bolstered by Thursday’s US consumer pricing data and Fed officials’ growing confidence that inflation was under control.

According to the CME FedWatch tool, market pricing currently implies a more than 90% possibility of a Fed easing cycle commencing in September, up from just over 50% a month ago.

Sterling fell 0.03% to $1.29095, but remained near a one-year high achieved on Thursday, as remarks from Bank of England officials and better-than-expected GDP figures caused traders to lower bets on an August rate cut in Britain.

The euro rose 0.04% to $1.0871, while the US dollar weakened and remained at a one-month low against a basket of currencies from the previous session.

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