Yen gains on intervention fears

The Japanese yen strengthened past 156 per dollar on Thursday, reversing the prior session’s losses as markets continued to monitor the currency closely for possible intervention from authorities.

Traders have viewed the US Thanksgiving holiday as a potential window for officials to step in to support the yen, though the mere threat of intervention has already helped limit its recent decline.

Market participants noted that liquidity conditions during the holiday period could make any government action more impactful, adding to the cautious tone in currency trading.

Investors also assessed the outlook for Bank of Japan policy after reports indicated the central bank is preparing for a possible rate hike next month, driven by concerns over persistent inflation, a weaker yen and diminishing political pressure to keep rates ultra-low.

Speculation has grown that policymakers may shift further away from their long-standing accommodative stance as wage growth picks up and inflation remains above target, signaling a gradual normalization of monetary settings.

Externally, the yen also benefited from broad dollar softness as traders increased bets on additional US Federal Reserve rate cuts.

Softer US economic data and more dovish Fed commentary have weighed on Treasury yields, reducing the dollar’s appeal and giving the yen additional support after weeks of sustained pressure.