Yen Surges Amid Speculation of Japanese Intervention

The yen surged to a nearly four-week high against the U.S. dollar amid speculation of Japanese authorities intervening to prop up the currency. The boost started when U.S. consumer price data showed easing inflation, raising the odds of a Federal Reserve rate cut. Traders anticipate further yen strength if rate cuts and interventions continue.

The yen surged to an almost four-week high against the U.S. dollar on Friday, stirring speculation that Japanese authorities may have intervened for a second consecutive day to support the currency. The Japanese yen, which had been at 38-year lows, began its rally on Thursday when U.S. consumer price data for June showed ease, increasing the likelihood of a Federal Reserve rate cut as soon as September.

On Friday, the yen's upward movement followed data indicating moderate increases in U.S. producer prices for June. According to James Malcolm, head of FX strategy at UBS in London, Friday's yen movement could be attributed to either intervention or rate checking. Lou Brien, market strategist at DRW Trading in Chicago, added that even minimal intervention could influence market sentiments significantly.

Speculation was further fueled by the Bank of Japan's daily operations data showing the possibility that up to 3.57 trillion yen was spent on Thursday's intervention. While Tokyo's top currency diplomat, Masato Kanda, refrained from confirming the interventions, the dollar fell 0.35% to 158.24 yen. Market dynamics indicate a narrowing interest rate differential between Japan and the U.S. that could potentially reverse the yen's weakening trend.

(With inputs from agencies.)