Yen jumps as analysts suspect official intervention; dollar broadly weaker

The euro was 0.4% higher at $1.1522, extending its rise from the prior session when the U.S. dollar weakened after a divided Fed left interest rates unchanged Fed Chair Kevin Warsh pledged an unwavering commitment to bring inflation down, a message that left markets confused about just what he was prepared to do in coming months. Traders are ramping up their expectations for the Fed to leave interest rates unchanged again in September, with the probability for a hold now at 34.8%, compared with a 24% chance before the latest meeting, the CME Group's FedWatch tool showed. The pound was 0.5% higher at $1.3429 after the Bank of England kept interest rates on hold on Thursday as it waits to see how the Iran war affects inflation pressures, although the renewal of hostilities prompted a third policymaker to back a rate hike. In cryptocurrencies, bitcoin BTC= was up 2% at $64,772. The dollar sank against the Japanese yen on Thursday with traders alert to the possibility of intervention from Japan to prop up its stubbornly weak currency. The dollar was also weaker across the board after data showed U.S. inflation slowed in June, a day after the Federal Reserve left interest rates unchanged, dashing hopes for a rate hike. Markets have been on alert for yen-buying by Japanese authorities, who have warned of action for months as currency weakness exacerbates the cost-of-living impact of rocketing energy import prices. The Japanese finance ministry’s foreign exchange division could not be reached immediately for comment. Market participants said the sharp move in the Japanese currency was likely a result of intervention by Japanese authorities to halt the currency's slide to new multi-decade lows, while emphasising that there was no official confirmation. "The yen is a steady-Eddie type of asset," said Juan Perez, senior director of trading at Monex USA in Washington. "So when in one day, intraday change, over 1%, almost 2% as it is in front of me right now, that means that there's some sort of intervention," he said. The yen's jump comes ahead of the Bank of Japan's interest rate verdict on Friday. Economists anticipate Japanese interest rates will stay at 1%. However, recent reports show that central bankers are considering a faster pace of interest-rate hikes, as the economy reels from inflation pressures as the Iran war rages on. "It appears Japanese authorities have taken advantage of the bearish momentum generated by the weaker U.S. data to sell dollars and support the yen," said Roberto Cobo Garcia, head of G10 FX strategy at BBVA. Data on Thursday showed the Personal Consumption Expenditures Price Index increased 3.7% in the 12 months through June after advancing by an unrevised 4.1% in May, which was the largest gain since April 2023, the Commerce Department's Bureau of Economic Analysis said. The increase in PCE inflation was in line with economists' expectations. Separately, data showed U.S. economic growth slowed in the second quarter amid a widening in the trade deficit. Gross domestic product increased at a 1.5% annualized rate last quarter, the Commerce Department's Bureau of Economic Analysis said in its advance estimate of second-quarter GDP on Thursday. Economists polled by Reuters had forecast GDP rising at a 2.1% pace. "Prices have shown a little bit of evidence that they're starting to calm down a bit," Monex's Perez said. Perez, however, noted that the weaker growth numbers were a worry. "Is there a potential that the Fed's going to have to worry about growth more than inflation? That's also very, very U.S. dollar negative," he said.

Yen jumps as analysts suspect official intervention; dollar broadly weaker

Euro, pound and bitcoin also move higher

Dollar falls as yen jumps on suspected intervention

BoJ meeting and U.S. data keep traders focused on policy

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