Yen in the spotlight after sudden jump
- The yen was last steady at 158.88 per dollar, having jumped 0.9% overnight
The yen surged unexpectedly, leading to speculation of official intervention, which put pressure on the dollar ahead of a crucial US jobs report and potential Federal Reserve rate hike.
- Yen's sudden rally and suspected government intervention.
- Impact of yen's strength on the US dollar and other currencies.
- Upcoming US jobs report and Federal Reserve rate hike expectations.
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.