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Japan’s currency recorded its biggest rise in nearly six months on Friday as speculation swirled that authorities may be planning an intervention.
THE yen jumped 1.7 percent against the U.S. dollar to ¥155.7 on Friday, a sharp rise for a major developed market currency.
The gains came after the New York Federal Reserve conducted a “rate check” on Friday, asking market participants to assess the yen, a move that is often seen as a precursor to market intervention, traders said.
The rate control was carried out at the request of the US Treasury. It was not immediately clear whether Washington had been in contact with Japanese authorities before the decision. A Treasury spokesperson declined to comment.
The prospect of intervention comes after the yen faced significant selling pressure in recent months.
Prime Minister Sanae Takaichi — who will stand in a early elections next month – proposes a policy that includes fiscal stimulus and tax cuts, factors that have worried investors.
The yen had rushed past the 159 yen line against the dollar early Friday – leaving it around levels that had previously prompted Japanese authorities to intervene – ahead of rate controls by the New York Fed.
“The abruptness of the move – coming after the yen threatened to breach the 160 yen red line – is of the type that is often associated with intervention in the foreign exchange market, although it could simply be an abrupt technical unwinding,” analysts at US bank Evercore said in a note to clients.
They added: “It is plausible that the United States would intervene in the current circumstances with the common goal of preventing excessive weakness in the yen while also hoping to indirectly contribute to the stabilization of the Japanese bond market. »
Japanese government debt has also been volatile in recent weeks, impacting global financial markets.
The country’s 40-year yield rose above 4 percent for the first time this week after Takaichi promised a two-year suspension of the consumption tax on food – a move that will cost the government about 5 trillion yen ($32 billion). Shorter-dated bonds were also under pressure.
