Steady Yen Follows Possible BOJ Intervention Amid Surprise U.S. Inflation Dip

The yen steadied after speculation about Bank of Japan intervention following an unexpected drop in U.S. consumer prices. Tokyo may have spent up to 3.57 trillion yen to support the currency, which has been languishing around 38-year lows. Traders are now betting on a Federal Reserve rate cut in September.

The yen steadied on Friday, a day after the Bank of Japan likely intervened to prop up the currency. This followed an unexpected drop in U.S. consumer prices, which fueled the largest drop in the dollar since May. The Japanese currency strengthened rapidly on Thursday in the European afternoon, sparking speculation that Tokyo may have stepped in to buy yen.

The U.S. consumer inflation report for June showed prices were easing, boosting the odds of the Federal Reserve cutting rates as soon as September. Daily operations data from the BOJ suggested the central bank had spent between 3.37-3.57 trillion yen ($21.18-22 billion) on Thursday. This marked Tokyo's intervention less than three months after its last market foray.

Tokyo's top currency diplomat, Masato Kanda, stated that authorities would intervene as needed in the foreign exchange market but declined to confirm whether intervention had occurred. Meanwhile, a Nikkei report suggested the BOJ had conducted rare rate checks on the euro/yen pair, adding to the day's unusual market activity.