Volatile Yen Triggers Rate Check Speculation

The Japanese yen has been volatile in recent days, prompting speculation of a rate check from Tokyo. The yen was trading at 156.64 per US dollar after dropping 2% last week.

The Bank of Japan raised interest rates on Friday to their highest level in 31 years to 1.25%, but the move did not boost the yen as two dissenting votes and a lack of explicitly hawkish guidance disappointed investors.

Traders view rate checks, which involve authorities asking banks for currency quotes to gauge market conditions, as a precursor to currency intervention. A rate check was reportedly conducted by Japanese officials before the Nikkei newspaper reported on it.

Fred Neumann, chief Asia economist at HSBC, said the BOJ's messaging has become harder due to the Fed's hawkish signal with its unanimous decision to raise its policy rate.