Yen Soars to Six-Week High Amid Speculation of Official Push

Japan's yen reached a six-week high, sparking speculation of official intervention, ahead of a significant European Central Bank (ECB) meeting. Traders expect the ECB to keep rates steady while the market debates a potential rate cut in September. The yen's sharp rally has prompted a reassessment of trades, influenced by global interest rate movements and remarks from U.S. presidential candidate Donald Trump.

Japan's yen surged to a six-week high on Thursday, fueling speculation of an official intervention while traders awaited the European Central Bank (ECB) meeting to determine the euro's next move. The common currency stood at $1.0929, close to its four-month peak ahead of the meeting where rates are expected to remain steady, with focus on potential rate cuts in September.

Commonwealth Bank of Australia's Joe Capurso commented, "We expect the ECB to emphasize that future interest rate cuts will be dependent on further declines in inflation and wages growth. The risk is that pricing for the September cut is reduced."

The yen extended a sharp rally, touching 155.37 per dollar during quiet early trading hours in Asia, steadying around 156.35 later. Bank of Japan data suggested authorities might have intervened last week, buying nearly 6 trillion yen. National Australia Bank strategist Rodrigo Catril noted that many traders, after an intervention, were reassessing their positions.

Interest rate markets are pricing in more than 60 basis points of U.S. rate cuts this year, with a 20 basis point hike expected in Japan, narrowing the previously wide rates gap. Remarks from U.S. presidential candidate Donald Trump also rattled markets, influencing the yen's position relative to the dollar and yuan.

Thus far this year, the yen has been the worst-performing G10 currency against the dollar. China's yuan firmed slightly, trading at 7.2576 per dollar as traders awaited announcements from a key leadership meeting in Beijing. Meanwhile, New Zealand's dollar jumped, influenced by domestic inflation rates affecting interest rate cut bets.

(With inputs from agencies.)