The yen was on course for its biggest weekly rise in 16 months on Friday, helped by Japan’s alleged intervention this week to push the currency away from its lowest levels in 34 years, while the dollar index fell to its lowest level in three weeks before the publication of employment figures in the United States.
The yen hit a three-week high of 152.75 per dollar in Asian trading, and is expected to post a weekly gain of 3.19%, the biggest since January 2023. It was recently rising by 0.26% to 153.25 per dollar.
Traders remained expectant for further sharp swings in the yen after Tokyo was suspected of intervening to prop up its currency this week, Monday and Wednesday, to the tune of 9.16 trillion yen (59.8 billion dollars), as data from the Bank of Japan suggests.
“The second round of intervention in a week, deployed after a less hawkish than expected FOMC (Federal Open Market Committee) on Wednesday, sent the markets the message that the Ministry of Finance is less tolerant of a post-intervention depreciation of the yen this time,” said Francesco Pesole, currency strategist at ING, recalling the fall of the yen after Japan’s intervention in the foreign exchange market in September 2022.
The Fed held interest rates steady, as expected, following its two-day monetary policy meeting on Wednesday.
Traders are now turning their attention to U.S. nonfarm payrolls data due later Friday, after Federal Reserve Chairman Jerome Powell told reporters that interest rates may have to stay high for longer, but that he ruled out the idea of a further increase in rates.
The dollar index, which measures the currency against six other currencies including the yen, fell 0.08% to 105.22 after hitting its lowest level since April 11. It reached its lowest level since April 11. It was heading for its biggest weekly decline in almost two months, falling 0.8% this week.
“Today’s US jobs numbers are a major event for markets, as details of the jobs report will be a key test for the most bullish bets on Fed rate cuts,” added Mr. Pesole.
Elsewhere, the euro rose 0.18% to $1.0740, and was aiming for a weekly gain of nearly 0.46%, the biggest since March.
Sterling rose 0.15% to $1.2558 and was also poised for its biggest weekly gain in two months, rising 0.46% this week.
