FOREX-Yen steady as traders remain alert to intervention risks

The yen steadied after a brief rise, but remained down 0.46% at 160.21 against the dollar, despite a second round of intervention being anticipated by traders.

The ​yen steadied after rising briefly earlier on Friday, with traders remaining ‌alert ​for a second round of intervention after Japanese authorities stepped in to prop up their currency a day earlier.

The yen traded up as much as 0.6% at 158.535 per dollar in London morning trading but quickly gave up its gains. It was last down 0.46% at 160.21, having weakened ‌to as low as 160.90 against the dollar after the BOJ earlier in the day kept short-term interest rates steady at 1% in a widely expected move.

Thursday's yen-buying and dollar-selling intervention set the Japanese currency for its biggest weekly rise since February and a monthly jump of more than 1.5%. The move has pulled it away from four-decade lows but failed to give it a sustained boost. "Previous interventions have provided temporary relief, but the ‌yen has often resumed its decline once the immediate support faded," said Harun Thilak, head of trading for North America at Validus Risk Management.

"This highlights the limits of direct intervention when broader ‌macroeconomic and interest-rate fundamentals remain unfavourable." The BOJ, which hiked rates to a 31-year high last month, warned for the first time that underlying inflation could exceed its target, signalling further rate hikes from as soon as September.

BOJ Governor Kazuo Ueda said many of the board members' inflation forecasts are fairly high and they see risks skewed to the upside. Japan's slow pace of rate hikes has been blamed for pushing the yen to 40-year lows below 163 per dollar recently, and most analysts polled by Reuters ⁠expect the ​BOJ to raise rates again to 1.25% by year-end.

Tokyo was ⁠also receiving support from the U.S. that "goes beyond psychological support", Japan's top foreign exchange diplomat said on Friday. Thursday's moves resulted in spot yen trading volumes surging to their highest in 10 years on the EBS trading platform and futures trading volumes hitting ⁠highest on record, the CME Group said.

In a rare coordinated move, South Korea also conducted dollar-selling intervention on Thursday to support its currency, a market source told Reuters. The won rose to a nine-month high before paring some gains, last ​down 1.36% to stand around 1442.49 against the dollar.

WAVE OF INTEREST-RATE DECISIONS THIS WEEK The BOJ meeting followed the U.S. Federal Reserve's decision to leave interest rates unchanged, which bruised the ⁠dollar as traders questioned whether the Fed's new chair was serious about containing inflation.

That has added to the dollar's pain with the greenback heading for its biggest weekly fall since early April and a monthly loss of nearly 1% against a basket of peers. On ⁠Friday, ​it was a touch higher after falling around 1.5% in the last three sessions.

"The market is a bit lost in translation in the sense that forward guidance has been literally abandoned by all the major central banks and now the market is moving quite fast when it comes to the monetary policy expectations," said Mabrouk Chetouane, head of global market strategy at Natixis Investment Managers in Paris. In ⁠Europe, the euro inched 0.4% lower to $1.1483 after hitting a six-week high in the last session.

Sterling was down 0.4% against the dollar after nearing a two-week high on Thursday. The Bank of England ⁠also kept its main lending rate steady in a widely-expected ⁠decision on Thursday.

Norway's crown was on track to notch the biggest monthly gains against the U.S. dollar among major currencies, up nearly 4% and likely benefiting from higher oil prices due to Norway's net exporter status. The Aussie and Kiwi dollar were little changed at $0.7018 and $0.5861, respectively.

In cryptocurrencies, bitcoin slipped 1.5% ‌to $63,739.6, on pace to snap ‌a four-week winning streak.