FOREX-Japan's yen jumps 5 yen against dollar on suspected intervention

The intervention comes days ahead of the Federal Reserve's May 1 policy review, with investors already anticipating a delay in Fed rate cuts after a batch of sticky U.S. inflation and as officials including Chair Jerome Powell emphasise even those plans are dependent on data. Vishnu Varathan, head of Asia economics and strategy at Mizuho Bank in Singapore, expects the dollar-yen pair will see more two-way action until the Federal Open Market Committee (FOMC) meeting, unlike in the past few weeks when hawkish Fed expectations had kept the dollar steadily rising against most other currencies.

The Japanese yen surged 5 yen against the dollar in Asian trading on Monday, with traders citing heavy dollar-selling intervention by Japanese banks after the currency fell to fresh 34-year lows earlier in the day. The dollar fell as far as 155.25 yen in two sudden moves that took it from 160.245 to around 158 and subsequently even lower.

The yen was at 155.86 by 0500 GMT, up 1.6% in trading thinned by a Golden Week holiday in Japan. "The sudden, sharp drop in dollar-yen passes the duck test. If it looks like a duck, swims like a duck, then it probably is a duck. Looks and smells like intervention," said Sim Moh Siong, currency strategist at Bank of Singapore.

Markets had been on guard for any intervention by Japanese authorities to contain the yen's nearly 11% fall this year. The Commodity Futures Trading Commission's weekly commitments of traders report showed that non-commercial traders, a category that includes speculative trades and hedge funds, had increased their yen short positions to 179,919 contracts in the week ended April 23, the largest since 2007.

The yen had moved nearly 3.5 yen between 158.445 and 154.97 on Friday as traders vented their disappointment after the Bank of Japan kept policy settings unchanged and offered few clues on reducing its Japanese government bond (JGB) purchases -- a move that might have put a floor under the yen. The intervention comes days ahead of the Federal Reserve's May 1 policy review, with investors already anticipating a delay in Fed rate cuts after a batch of sticky U.S. inflation and as officials including Chair Jerome Powell emphasise even those plans are dependent on data.

Vishnu Varathan, head of Asia economics and strategy at Mizuho Bank in Singapore, expects the dollar-yen pair will see more two-way action until the Federal Open Market Committee (FOMC) meeting, unlike in the past few weeks when hawkish Fed expectations had kept the dollar steadily rising against most other currencies. "The bar is pretty high for a sustained hawkish surprise, which would in turn lift yields," he said, referring to the Fed.

"So, from a yield-spread perspective between U.S. Treasuries and JGBs, for that to continue to fuel further yen depreciation, the bar is really high because the Fed may not be tilting as hawkish as markets expect either." "The BOJ disappointment might be transcribed onto the FOMC insofar that they may be more undecided than decidedly hawkish."

The Fed is seen holding its benchmark interest rate steady at 5.25%-to-5.5% at the April 30-May 1 meeting. Investors now see perhaps only a single cut this year, currently anticipated by November, according to the CME's FedWatch tool. The yen's move caused both the euro and sterling to rise but they stayed close to the ranges hit during Friday's volatile session. Sterling was at $1.2541, up 0.4%.

(Editing by Lincoln Feast, Jacqueline Wong and Kim Coghill)

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