Yen Rebounds Amid Intervention Fears

The Japanese yen jumped nearly 1% toward 161 per dollar on Thursday before trimming its gains, rebounding from four-decade lows as traders stayed on high alert for possible currency intervention. The move followed a Reuters report that Japan may stop signaling its intervention plans in advance, unlike before the April 30 operation, with the new approach potentially proving more effective in catching traders off guard and unwinding speculative bets against the yen. The yen also found some support after Federal Reserve Chair Kevin Warsh said US inflation expectations had eased over the past month, signaling there was no urgency to raise interest rates. Meanwhile, investors remain skeptical that the Bank of Japan will accelerate policy tightening as it continues its gradual normalization path, with persistent carry trades and the still-wide interest rate differential between Japan and the US continuing to weigh on the currency.

The Japanese yen hovered around 162.5 per dollar on Thursday, remaining at its weakest level in four decades and keeping traders on alert for possible currency intervention ahead of a US public holiday, when thinner market liquidity could magnify the impact of any official action. Finance Minister Satsuki Katayama said on Wednesday that authorities would respond appropriately to currency market developments at any time, reiterating previous warnings. The yen also stayed under pressure against the dollar even after Federal Reserve Chair Kevin Warsh said US inflation expectations had eased over the past month, signaling there was no urgency to raise interest rates. Meanwhile, investors remain skeptical that the Bank of Japan will accelerate policy tightening as it continues along its gradual normalization path, with persistent carry trades and still-wide interest rate differential between Japan and the US weighing on the yen.

The Japanese yen weakened past 162.5 per dollar on Wednesday, sinking to its lowest level in four decades and fueling speculation that authorities could intervene to support the currency. Traders are watching Friday’s US holiday as a potential opportunity for Tokyo to buy yen, as thinner market liquidity could amplify the impact of any intervention. The yen came under renewed pressure after fresh data highlighted the resilience of the US economy, reinforcing expectations that the Federal Reserve will raise interest rates this year. Meanwhile, investors remain skeptical about the Bank of Japan’s willingness to accelerate policy tightening as it continues its gradual normalization path. Persistent carry trades and sustained safe-haven demand for the US dollar also weighed on the yen. Additionally, Japan’s heavy reliance on Middle Eastern oil imports left its economy vulnerable to potential disruptions in regional energy supplies.