Yen in the spotlight after sudden jump

SINGAPORE: The yen held its gains on Thursday ​after a sudden, brief surge in the previous session that traders suspect may have ‌been driven by government authorities, keeping pressure on the dollar ahead of a crucial US jobs report.

The yen was last steady at 158.88 per dollar, having jumped 0.9% overnight, in a move that left market participants on alert for ​an official intervention from Tokyo.

Its rally was broad-based, with the euro falling roughly 1% against the ​yen on Wednesday; sterling dropped 1.15%, with both currencies nursing losses in early ⁠Asia trade.

“The yen rally was about 0.9% and it’s not a big move, and I definitely don’t ​think that was an intervention,” said Carol Kong, a currency strategist at Commonwealth Bank of Australia. “But some ​market participants have speculated that the rally was caused by a rate check.”

Since a rare joint yen-buying intervention between the US and Japan on July 31, the yen has struggled to find lasting support, coming under pressure from still-wide interest rate ​differentials, fiscal worries and a renewed spike in energy prices.

In the broader market, the strength in ​the yen left the US dollar on the back foot, with the euro up marginally to $1.1589. Sterling attempted a bounce ‌from ⁠a three-week low and last bought $1.3482.

The New Zealand dollar edged 0.07% higher to $0.5856, having slid 0.67% on Wednesday following a dovish hike from the country’s central bank, while the Aussie held near a high of more than three months at $0.7166.

Against a basket of currencies, the dollar eased 0.04% to 99.56. The Canadian dollar ​held to overnight gains ​and stood at C$1.3836, ⁠after the Bank of Canada stood pat on rates on Wednesday, though it signalled its readiness to tighten policy to rein in inflation.

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All eyes are now on ​Friday’s U.S. nonfarm payrolls report, where analysts are forecasting an increase of 56,000 ​in jobs, ⁠following July’s shock drop of 23,000, with unemployment holding at 4.1%.

It would probably need a much weaker outcome to greatly lessen the risk of a September rate hike from the Federal Reserve, with markets now pricing ⁠in a ​61% chance of a move.

“After Fed Chair (Kevin) Warsh’s hawkish Jackson ​Hole speech, I think markets are back to the idea that the Fed is prepared to take action in the near ​term to bring inflation closer to target more quickly,” Kong said.