The Japanese Yen slipped against the US Dollar on Friday after a two-day rally, but remained on course for its strongest weekly performance in more than a month as traders increased bets on a Bank of Japan interest rate hike.
Broader markets, meanwhile, awaited the release of key US payrolls data.
The Yen climbed as high as 155.25 per Dollar in morning trading, just below the 155.20 level reached last month following the July intervention, before weakening to a session low of 156.45, down 0.4%.
It is nevertheless on track to gain 2.2% this week, marking its strongest weekly advance since late July, when Japan and the US carried out a rare joint intervention to stem the currency’s prolonged decline, Reuters reports.
With no clear signs of official intervention, analysts believe the Yen’s sudden surge is largely being driven by expectations that the Bank of Japan could adopt a more hawkish stance at its 17-18 September meeting.
Japan’s top currency diplomat, Atsushi Mimura said on Friday that he remained closely focused on exchange rate movements and was in regular contact with US authorities, keeping alive the prospect of another Yen-buying intervention.
Furthermore, the Dollar index, which tracks the US currency against a basket including the Yen and Euro, edged up to 99.02. The Euro was little changed at $1.1627, while Sterling stood at $1.3533.
Markets are now turning their attention to a series of key economic data releases ahead of the Federal Reserve’s 15-16 September policy meeting. The latest nonfarm payrolls figures are due later on Friday, followed by US CPI inflation data next week. The Dollar was on track for a 0.7% decline over the week.
Federal Reserve Governor Christopher Waller said on Thursday that he was inclined to leave interest rates unchanged at this month’s meeting if upcoming inflation data confirm that price pressures are continuing to ease.
Traders scaled back their expectations for a September rate hike following Waller’s relatively dovish comments, with market pricing putting the odds of a move this month back at around 50%.
Investors were also monitoring geopolitical tensions in the Gulf and their potential impact on inflation. Brent crude futures remained elevated above $95 a barrel following US strikes on Iran earlier this week.
Elsewhere, the New Zealand Dollar gained 0.3% to $0.5899 after the central bank raised its cash rate by 25 basis points to 2.75% on Wednesday and signalled that further tightening could be on the way. The Australian Dollar also edged higher, rising 0.1% to $0.7209.