The yen jumped as much as 0.94% against the dollar on Wednesday, trading at 158.67 per dollar, clawing back part of the ground it had given up since a rare joint U.S.-Japan intervention in late July. It was not immediately clear what prompted the move, though it came the same morning as hawkish Bank of Japan commentary. Analysts disagreed on whether it was a genuine shift or a central-bank rate check.
The yen gained sharply against the dollar on Wednesday after having retraced roughly half of the gains it made following the U.S.-Japan intervention at the end of July. The currency had touched a 40-year low of 163.98 per dollar before that intervention, then rose as high as 155.21 afterward before giving back some of the move.
BOJ hawkishness fuels the move
Hawkish BOJ board member Hajime Takata said Wednesday the central bank should conduct rate hikes nimbly to counter intensifying inflationary pressures, rather than stick to a fixed semiannual pace markets had anticipated. That followed BOJ Governor Kazuo Ueda's signal on Tuesday of a strong chance of a hike this month.
U.S. Treasury Secretary Scott Bessent also voiced strong support for "decisive" monetary steps to combat yen weakness in a meeting with Ueda, the Treasury Department said Tuesday. According to Reuters: "markets don't really see a fundamental underpinning for the yen" at current levels, said Eric Theoret, currency strategist at Scotiabank, pointing to the yen's earlier drift back above 160.
Is it intervention, or a rate check?
Analysts said some factors support the idea that Wednesday's rally was an intervention, but the size of the move was relatively limited. Hank Calenti, chief strategist for global markets at SMBC EMEA, noted such moves tend to happen when markets are thin, as they would be this week.
Others were skeptical. Takafumi Onodera, First Vice President at Mitsubishi UFJ Trust and Banking Corporation, said the yen's gains remain below what an official move would produce, and that the magnitude does not suggest direct market intervention. Earlier Wednesday the yen had traded back to 160.39, its weakest level since the July intervention.
Oil and yields lifted the dollar earlier
A spike in oil prices and a rise in 10-year Treasury yields to a three-year high had boosted the dollar earlier Wednesday, before the yen's reversal. The dollar index fell 0.16% to 99.52, with the euro flat at $1.1591.
Higher oil prices have raised concerns about feeding into consumer price inflation that is already running above target, lifting the odds of a Federal Reserve hike. Fed funds futures traders are now pricing in 65% odds of a September hike, up from 35% before Fed Chairman Kevin Warsh's hawkish comments on Friday.
Source: Investing.com
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