#yen gave up ground in early trade on Thursday, reversing direction after a sudden surge against the #dollar overnight that #traders and #analysts were quick to attribute to intervention by #Japanese authorities.
#The_dollar was 0.9% higher at 155.98 #yen as of 0100 GMT, retracing about half of its late Wednesday surge from around 157.55 to exactly 153 over a period of about 30 minutes.
The sharp overnight move came in a quiet period for #markets after #Wall_Street had closed and hours after the #Federal_Reserve had wrapped up its policy meeting, with Chair #Jerome_Powell reiterating that sticky inflation meant interest rate cuts may be a while in coming.
When contacted by Reuters, #Japan’s vice #finance minister for international affairs, #Masato_Kanda, who oversees currency policy, said he had no comment on whether Japan had intervened in the market.
“It caught markets off guard because, obviously, it happened in the #USA_session and seemed to be timed with the FOMC to take advantage of a weaker #dollar,” said Kyle Rodda,
“The ‘sneak attack’ element really is the MOF (#Japan’s Ministry of Finance) looking to punish speculators and send a warning about shorting the #yen.”
The dollar remains up more than 10% against the yen this year, as traders push back expectations on the timing of a first Fed rate cut, while the #Bank of #Japan has signalled it will go slow with further policy tightening after raising rates for the first time since 2007 in March.
The #gap between long-term government bond yields in the two countries is a yawning 376 #basis #points. That helped lift the #dollar to a 34-year peak of 160.245 #yen on Monday and also spurred a sharp reversal which official data suggested was due to #Japanese intervention totalling about $35 #billion.
The dollar index, which measures the currency against the yen, euro and four other major peers, ticked up 0.07% to 105.78 on Thursday, following a 0.56% retreat on Wednesday from near six-month highs.
The euro was little changed at $1.071025, after climbing 0.45% in the previous session.
Sterling was steady at $1.2530, following a 0.28% rise a day earlier.
The dollar was already on the back foot before the yen’s spike, after Fed Chair Powell reiterated the #central #bank’s bias for easing policy – even if the timing has been delayed – while giving no sign that further rate hikes are under consideration.
“There was a collective sigh of relief in the financial markets after the Fed refrained from increasing its hawkishness,” said Jack #Mclntyre, portfolio manager for global fixed income and related strategies at Brandywine #Global.
“Think of this outlook as ‘high for longer’ as opposed to ‘higher for longer.’ The latter implies rate hikes, which is not today’s story.”
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