May 2 2024: The Japanese yen weakened against the dollar on Thursday, marking a reversal after a sudden surge overnight that traders and analysts quickly attributed to suspected intervention by Japanese authorities.
As of 0537 GMT, the yen was down by 0.80% at 155.73 per dollar, retracing about half of its late Wednesday surge from approximately 157.55 to exactly 153 within a 30-minute period.
This rapid movement occurred during a quiet market period, following the closure of Wall Street and hours after the U.S. Federal Reserve concluded its policy meeting.
Fed Chair Jerome Powell’s acknowledgment of the central bank’s easing stance contributed to the initial weakness of the dollar. However, Powell also mentioned that persistent inflation might delay rate cuts for some time.
Senior financial market analyst Kyle Rodda from Capital.com in Melbourne remarked, “It caught markets off guard because, obviously, it happened during the U.S. session and seemed to be timed with the FOMC to take advantage of a weaker dollar.”
Rodda further explained, “The ‘sneak attack’ element really is the MOF looking to punish speculators and send a warning about shorting the yen,” referring to the Japanese Ministry of Finance (MOF).
Japan’s vice finance minister for international affairs, Masato Kanda, who oversees currency policy at the MOF, declined to comment on whether Japan had intervened in the market.
Despite this fluctuation, the dollar has gained over 10% against the yen this year, influenced by shifting expectations regarding the timing of the first Fed rate cut. Meanwhile, the Bank of Japan has signaled a cautious approach to further policy tightening post its first rate hike since 2007 in March.
The dollar index, which gauges the currency against major peers, remained steady at 105.70 on Thursday, following a slight retreat on Wednesday from six-month highs.
The euro stood at $1.07175, after a 0.45% climb in the previous session, while sterling inched up 0.06% to $1.25345, building on Wednesday’s gain of 0.28%.
The Fed’s decision to maintain rates and Powell’s comments hinting at a prolonged “high for longer” stance rather than immediate rate hikes brought relief to financial markets, noted Jack McIntyre, portfolio manager at Brandywine Global.
The Australian dollar rose 0.23% to $0.6538, after a 0.8% surge overnight, while the New Zealand dollar held steady at $0.5930 following a 0.7% increase in the previous session.
