Investing.com — The Japanese yen rose sharply against the dollar on Wednesday and Thursday, with the USDJPY pair falling to its lowest in more than a month amid speculation that the government had intervened in the currency markets.
The pair, which measures the amount of yen needed to buy one dollar, fell 0.3% to 155.75 yen in morning trading on Thursday. This came after the pair fell 1.7% in the previous session, continuing the sharp decline since last Friday. Previously, the pair had risen to a 38-year high of almost 162 yen.
Traders attributed the yen’s reversal to likely government intervention, following repeated warnings from government officials that they will intervene in the event of excessive volatility in currency markets.
Data from the Bank of Japan shows that Tokyo may have spent 2.14 trillion yen ($13.5 billion) on interventions in the currency markets last week.
Although the yen saw some relief from rising expectations that the US Federal Reserve will cut interest rates in September, the outsized gains could possibly be attributed to government intervention. Japanese officials gave no clear signals that they had intervened.
But yields have fallen sharply in recent weeks amid growing speculation about a September rate cut, following soft inflation data and a series of dovish signals from the Fed.
The Japanese government last intervened in late April and early May, when the USD/JPY pair crossed the 160 level. The yen has been battered by continued signs of weak Japanese economic growth, which in turn is expected to limit the BoJ’s ability to tighten monetary policy.
