The yen hit an almost four-week high against the U.S. dollar on Friday, raising speculation that Japanese authorities may have intervened for a second day to prop up the currency, News.Az reports citing Reuters.
The rally in the Japanese currency , which has been languishing at around 38-year lows, began on Thursday just after data showed U.S. 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 U.S. producer prices increased moderately in June.
“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 and 3.57 trillion yen ($21.18 billion-$22 billion) on buying the yen on Thursday, less than three months after its last foray into the market.
The dollar was last down 0.56% at 157.91 yen after earlier reaching 157.3, the lowest since June 17. The yen touched a 38-year low of 161.96 per dollar last week.
Tokyo intervened at the end of April and in early May, spending roughly 9.8 trillion yen ($61.55 billion) to support the currency. There will be a month-end report from the ministry of finance that will confirm the amount spent on any intervention.
The gap between U.S. and Japanese rates has created a highly lucrative trading opportunity, in which traders borrow the yen at low rates to invest in dollar-priced assets for a higher return, known as carry trade.
A Fed rate cut would dent the appeal of this trade.
