The Japanese yen rose sharply against the US dollar on Wednesday and Thursday, with the USD/JPY pair falling to its lowest level in more than a month amid speculation that the government has intervened in currency markets.
The pair, which measures the number of yen needed to buy one dollar, was down 0.3% at 155.75 yen in morning trade on Thursday. This came after the pair fell 1.7% in the previous session, extending a sharp decline seen since last Friday. Before that, the pair rose to a 38-year high of around 162 yen.
Traders attributed the yen’s decline to possible government intervention, after repeated warnings from government officials that they would intervene in the event of excessive volatility in currency markets.
Bank of Japan data suggests Tokyo may have spent 2.14 trillion yen ($13.5 billion) intervening in currency markets last week.
While the yen has seen some relief from growing bets that the U.S. Federal Reserve will start cutting interest rates in September, the huge gains may have been due to government intervention. Japanese officials have given no clear indications that they have intervened.
But gold has fallen sharply in recent weeks amid growing speculation of a September interest rate cut, following weak inflation data and a series of dovish signals from the Federal Reserve.
The last time the Japanese government intervened was in late April and early May, when the USD/JPY pair crossed the 160 level. The yen has been hit hard by persistent signs of weak Japanese economic growth, which in turn is expected to limit the Bank of Japan’s ability to tighten monetary policy.