Key points
- Yen rises to a six-week high, fuelling speculation of official intervention.
- U.S. interest rate cuts expected, impacting the dollar and other currencies.
Japan’s yen surged to a six-week high on Thursday, sparking rumours of official intervention. Meanwhile, the dollar experienced broad losses as markets anticipated U.S. rate cuts in the near future.
Euro peaks, sterling steady, yen jumps in early Asian trading
The euro (EURUSD) reached a four-month peak overnight and stayed near $1.094, while sterling (GBPUSD) remained steady at $1.3007, just below the one-year high achieved overnight. The yen (USDJPY) jumped sharply on Wednesday and rose another 0.5% to 155.37 per dollar during the quiet early hours of the Asian session on Thursday.
See: Yen on the rise as seen on the VT Markets app.
Bank of Japan money market data indicated that authorities might have purchased nearly 6 trillion yen last week. Traders speculated that this week’s movements showed signs of further intervention or markets being spooked by that possibility.
Many traders and Japanese investors, after the intervention, seemed to be looking to reload on their trades. The big move on Wednesday would have caught them off guard and triggered a reassessment or unwinding of those positions.
Markets predict rate changes, Trump comments unsettle investors
Interest rate markets are pricing in more than 60 basis points of U.S. interest rate cuts this year and approximately 20 basis points of hikes in Japan. This narrows the wide rates gap that had previously encouraged investors to take large short positions in the yen.
Trump described the dollar’s strength and the weakness of the yen and yuan as a major problem, which unsettled markets.
You might be interested: Asian currencies face challenges as markets react to Trump attack fallout
So far this year, the yen is the worst-performing G10 currency against the dollar, losing over 9%, while the yuan is down about 2.2%.
China’s yuan rose slightly on Wednesday and will be closely monitored on Thursday as traders await news from a key leadership gathering in Beijing expected to conclude later in the day. In early offshore trade, the yuan (USDCNH) hovered around its 50-day moving average at 7.2667 per dollar.
New Zealand’s dollar (NZDUSD) jumped through its 200-day moving average on Wednesday and held its gains early on Thursday at $0.6076. This followed some sticky domestic elements of inflation, which paused bets on imminent interest rate cuts.
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