By Chuck Mikolajczak
NEW YORK (Reuters) – The yen rose sharply on Wednesday in a move suspected to be the result of another intervention by Japanese officials to support the currency, which has been battered by a multi-decade low.
The yen has made several big moves in recent days, rising sharply on Thursday and Friday from a 38-year low of 161.96 against the dollar, in sudden rallies that market participants said were signs of currency intervention.
Data from the Bank of Japan released Tuesday suggested Tokyo may have spent 2.14 trillion yen ($13.5 billion) in Friday’s intervention. Adding the estimated amount Japan spent on Thursday, it’s doubtful Japan bought nearly 6 trillion yen through last week’s intervention.
“The fact that this move is larger than anywhere else seems to suggest some kind of intervention, but the timing doesn’t really make sense,” said Karl Shamotta, chief market strategist at Corbay in Toronto. “It seems to be coming out of nowhere and not because of a move in volatility or a move in the spot rate.”
“We are probably in a situation where traders are acting quickly, given the fact that the Bank of Japan is looming in the background, which is exacerbating the fundamental moves. But as it stands, it’s hard to say whether there is any real intervention going on here; we’re not seeing flow data to suggest that this is intervention at this point.”
Market participants also cited Republican presidential candidate Donald Trump’s comments about the dollar’s recent strength in an interview with Bloomberg published Tuesday as a possible reason for the dollar’s weakness.
The dollar fell against the Japanese yen by 1.12% to 156.56 yen after falling to 156.09 yen, a level not recorded since June 12.
Japan’s finance ministry did not respond to requests for comment. Masato Kanda, Japan’s top currency diplomat, said he would have to respond if speculators caused excessive moves and that there was no limit to how often authorities could intervene, Kyodo News reported.
The US dollar, which measures the greenback against a basket of currencies, also fell on the day, falling 0.38% to 103.80 after comments from a number of Federal Reserve officials suggested the central bank was close to cutting interest rates.
While markets see little chance of at least a 25 basis point rate cut at the Fed’s July meeting, they are pricing in a 96.2% chance for September, according to CME’s FedWatch tool.
The euro rose 0.32 percent to $1.0932 ahead of the European Central Bank’s monetary policy meeting on Thursday, when it is widely expected to keep interest rates on hold.
Sterling rose 0.39% to $1.3016 and hit a one-year high against the dollar at $1.3044 on data showing UK inflation rose slightly more than expected, dampening chances of a Bank of England interest rate cut at its next meeting.
Headline inflation stood at 2% year-on-year in June, versus expectations of a 1.9% rise, while closely watched services inflation was 5.7%.