By Karen Brettell
NEW YORK (Reuters) – The yen rose on Thursday, following a sudden rally late on Wednesday that traders and analysts attributed to intervention by Japanese authorities, while the dollar was broadly lower on Friday ahead of key jobs data.
The yen’s sharp move on Wednesday came during a quiet period for markets after Wall Street closed and hours after the US Federal Reserve concluded its policy meeting.
Fed Chairman Jerome Powell affirmed the central bank’s expectation to cut rates, but acknowledged that such a move would come later than expected due to persistently high inflation.
However, the dollar fell as the Fed did not take a more aggressive tone, including the possibility of further rate hikes.
The timing of the intervention was “pragmatic” because “volumes were low, liquidity was tight and it was easier to make an impact at the time,” said Brad Bechtel, global head of FX at Jefferies in New York.
The dollar last fell 0.9% to 153.09 yen.
Japanese Vice Minister of Finance for International Affairs Masato Kanda, who oversees currency policy at the finance ministry, told Reuters he had no comment on whether Japan had intervened in the market.
Wednesday’s volatility came after a similar move on Monday, which also occurred during a time of light trading.
“It is clear that they want to make as much impact as possible and do it as efficiently as possible,” Bechtel said.
Official figures from the Bank of Japan show that Japan may have spent 3.66 trillion yen ($23.59 billion) on Wednesday and 5.5 trillion yen ($35.06 billion) on Monday to support the currency, pulling back from new 34-year lows.
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While the supposed interventions could buy Japan for some time, the trend is likely to remain negative for the Japanese currency until the US economy slows down and as long as the Bank of Japan disappoints traders about how much it is willing to raise rates.
The dollar continues to rise more than 10% against the yen this year as traders lower expectations on the timing of an initial Fed rate cut, while the BOJ has signaled that further policy tightening will be slow after an interest rate increase in March for the first time. time since 2007.
The next major US economic focus that could drive further dollar/yen price moves will be Friday’s April jobs report, which is expected to show employers added 243,000 jobs during the month.
“A lot depends on tomorrow’s jobs report,” said Marc Chandler, chief market strategist at Bannockburn Global Forex in New York.
A weaker reading would provide relief to Japanese authorities and likely push government bond yields and the dollar lower. However, a strong report could send yields and the dollar higher and increase the risk of further interventions.
If 10-year Treasury yields approach the 5% mark, “I would say the dollar/yen will come under more pressure,” Chandler said. “It’s all about what happens with U.S. interest rates; we’re kind of like big moving pieces.”
The interest rate on government bonds with a ten-year term last stood at 4.57%.
Data on Thursday showed that the number of Americans filing new claims for unemployment benefits remained at low levels last week.
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The euro fell 0.38% to 105.31, while the euro rose 0.17% to $1.0728.
The dollar weakened 0.59% to 0.91 Swiss franc after Swiss annual inflation accelerated faster than expected in April.
In cryptocurrencies, bitcoin gained 3.56% to $59,319.
