Hawkish BOJ board member Hajime Takata said on Wednesday that the central bank should conduct interest rate hikes nimbly to counter intensifying inflationary pressures, rather than adhere to a fixed semiannual pace anticipated by markets.
"It is difficult to say what is behind the move in dollar/yen, but I suspect this is more likely to be a rate check than intervention to try and shift the trend as the recent intervention did not do that," Scicluna said.
During a rate check, a government or central bank asks financial institutions to quote an exchange rate but does not buy or sell.
BOJ Governor Kazuo Ueda on Tuesday also signalled a strong chance of a hike this month. U.S. Treasury Secretary Scott Bessent voiced strong support for "decisive" monetary steps to combat yen weakness in a meeting with Ueda, the Treasury Department said on Tuesday.
Analysts said that while some factors support the possibility of Wednesday's yen rally being an intervention, the size of the move was relatively limited.
"If it is intervention, they do tend to happen when markets are thin, right. They would be thin this week, so we could possibly tick that box," said Hank Calenti, chief strategist, global markets at SMBC EMEA.
On the other hand, the yen's gains remain below what might be expected from an official move, said Takafumi Onodera, First Vice President at Mitsubishi UFJ Trust and Banking Corporation.
"Unless the yen strengthens further from here, the magnitude of the move does not suggest direct market intervention," he said.
The yen has struggled to find support due to the wide differential between U.S. and Japanese interest rates, with the yen trading back to 160.39 earlier on Wednesday, the weakest level since the intervention.
"The drift back above 160 suggests that markets don't really see a fundamental underpinning for the yen at this point," said Eric Theoret, currency strategist at Scotiabank.
Yen gains sharply against U.S. dollar
The Japanese yen gained sharply against the U.S. dollar on Wednesday after having retraced approximately half of the increases made following a rare joint intervention by the U.S. and Japan at the end of July.
It was not immediately clear what prompted the move. The yen, which had reached a 40-year low of 163.98 per dollar before the intervention, rose to as high as 155.21 afterwards before surrendering some of the gains. The yen JPY= was last up 0.94% at 158.67 per dollar.
"It's a big chunky move and it would be a convenient time for the U.S. or Japan, to at least conduct a rate check, after the Bank of Japan comments this morning," said Chris Scicluna, head of economic research at Daiwa Capital Markets Europe.
Canadian dollar and kiwi react to central banks
The Canadian dollar gained after the Bank of Canada kept its key policy rate on hold at 2.25% on Wednesday, as widely expected, but said the risks to inflation had risen while new U.S. tariffs made growth prospects more uncertain.
The loonie CAD= was last up 0.39% at C$1.384 per dollar.
The New Zealand dollar dropped after the country's central bank lifted interest rates for a second straight meeting on Wednesday and signalled more tightening ahead, but stressed any further moves would be measured as it warned of mounting risks to the economic outlook.
The kiwi NZD= weakened 0.71% to $0.5849.
Oil, yields and central bank moves weigh on currencies
A spike in oil prices and a rise in benchmark 10-year Treasury yields to a three-year high had boosted the dollar earlier on Wednesday.
The dollar index =USD, which measures the greenback against a basket of currencies including the yen and the euro, fell 0.16% to 99.52, with the euro EUR= flat on the day at $1.1591.
Sterling GBP= weakened 0.11% to $1.35.
Oil prices retreated from more than one-month highs reached earlier on Wednesday, with traders weighing the risk of supply disruptions after overnight strikes by the U.S. and Iran against signs that crude supplies continue to reach the market.
Concerns have grown that higher oil prices could feed through to consumer price inflation that is already running above target and raise the odds of Federal Reserve interest rate hikes.
Hawkish comments from Fed Chairman Kevin Warsh on Friday prompted traders to raise bets on a hike at the U.S. central bank's September 15-16 meeting.
Fed funds futures traders are pricing in 65% odds of a September hike, up from 35% before Warsh's comments.
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