Dollar Falters Against Yen as Traders Anticipate Intervention

The US dollar has weakened against the Japanese yen on Friday, with traders anticipating potential intervention from authorities. The dollar dipped as much as 0.6 percent to 158.535 yen before recovering slightly to trade down 0.1 percent at 159.31 yen.

Following a 2.4 percent drop in the dollar against the yen a day earlier, US Treasury officials informed banks that they may intervene in the yen market on Friday and advised them to 'stand ready for future action,' according to a source familiar with the matter.

Tokyo received support from Washington, which 'goes beyond psychological support,' said Japan's top foreign exchange diplomat. Eric Theoret, FX strategist at Scotiabank, questioned whether the modest rise in the yen on Friday was due to actual intervention or traders reacting to the possibility of one.

The Bank of Japan kept short-term interest rates steady at 1 percent, a move that was widely expected. However, Governor Kazuo Ueda warned for the first time that underlying inflation could exceed its target, signaling further rate hikes from as soon as September.