Market Movements: Japan's Yen Surges Amid Speculation

Japan's yen surged to a six-week high on Thursday, leading to speculation of official intervention, while the U.S. dollar faced widespread losses as markets braced for upcoming rate cuts.

The euro, after reaching a four-month peak overnight, held near that level at $1.094, and sterling remained steady at $1.3007, just below its one-year high achieved in overnight trading. The yen continued its rise from Wednesday, gaining an additional 0.5% to reach 155.37 per dollar during a quiet early session in Asia on Thursday.

Bank of Japan money market data indicated that authorities might have bought nearly 6 trillion yen last week, with traders suggesting that this week's movements could signal further intervention or market reactions to potential intervention. National Australia Bank strategist Rodrigo Catril commented that many traders and Japanese investors, anticipating intervention, were reassessing their positions in light of the significant yen movement on Wednesday.

Interest rate markets are currently pricing in more than 60 basis points of U.S. rate cuts and around 20 basis points of hikes in Japan this year, narrowing the previously wide rate differential that had encouraged large short positions on the yen. Analysts also noted that comments by U.S. presidential candidate Donald Trump, regarding the strength of the dollar and the weak yen and yuan, had unsettled markets.

This year, the yen has been the worst-performing G10 currency against the dollar, down over 9%, while the yuan has decreased by about 2.2%. On Wednesday, China's yuan showed a slight rise and will be monitored closely on Thursday as traders await the conclusion of a key leadership meeting in Beijing. Early offshore trade saw the yuan at around 7.2667 per dollar, near its 50-day moving average.

Elsewhere, New Zealand's dollar broke through its 200-day moving average on Wednesday and held its gains early on Thursday at $0.6076 following domestic inflation data that tempered expectations for immediate rate cuts. The Australian dollar remained steady at $0.6725.

(With inputs from agencies.)