The Japanese currency jumped from almost 161.50 per dollar to as strong as 157.44, fuelling talk that officials had intervened again, having done so in April when the yen hit a 38-year low
Markets mostly rose Friday after a largely negative day on Wall Street despite growing confidence of a US interest rate cut, while the yen experienced big swings as speculation swirled that Japan had stepped into forex markets to support the currency.
A smaller-than-expected figure on the June CPI ramped up bets on the Fed reducing borrowing costs in September, and possibly again before January.
The news came after Fed chair Jerome Powell said decision-makers would not wait until inflation had hit the bank’s 2% target before loosening monetary policy, warning that “if you waited that long, you have probably waited too long”.
On Thursday, San Francisco Fed chief Mary Daly said: I do think with the incoming information on inflation, growth and the labour market, some policy adjustments are likely to be warranted.
However, while the numbers seemed to give the all-clear for a reduction in two months, the S&P 500 and Nasdaq slipped from record highs, with observers blaming a shift from big tech such as Amazon and into smaller, largely overlooked stocks.
But most of Asia extended Thursday’s rally.
Hong Kong jumped more than 2%, while there were also gains in Singapore, Sydney, Wellington, Mumbai, Bangkok, Jakarta and Manila. London, Paris and Frankfurt all opened higher.
However, Tokyo dipped with Seoul and Taipei. Shanghai was flat.
Analysts, meanwhile, said the softer US inflation number provided Japanese authorities the perfect opportunity to step into forex markets to provide support to the yen, which soared against the dollar Thursday.
The Japanese currency jumped from almost 161.50 per dollar to as strong as 157.44, fuelling talk that officials had intervened again, having done so in April when the yen hit a 38-year low.
The pronounced move in the yen seems to be coming on the back of combined impact from US inflation and intervention by Japanese authorities, Charu Chanana, at Saxo Markets, told AFP.
There seems to be a new playbook for Japanese interventions, coming in along with supportive fundamentals, making the strength in yen somewhat more durable, Chanana added.
And National Australia Bank’s Ray Attrill told Friday’s “NAB Morning Call” podcast that the “outsized move” makes it “fairly inconceivable that it hasn’t had a helping hand”.
While speculation swirled about official involvement, Japan’s top currency diplomat Masato Kanda told reporters late Thursday that authorities were “not in a position to comment on whether they intervened in the market”, as per public broadcaster NHK.
Objectively speaking, there have been quite rapid fluctuations, which has impacted people’s lives, he added.
There was little major reaction to data showing Chinese exports soared more than expected last month but imports beat estimates to rise.
