Yen Surges Amid Fresh Intervention Talk, Stocks Rally on Dovish Fed Hopes
The Japanese yen surged against the US dollar on Thursday due to speculation of another intervention by Japan to prop up its currency. The yen jumped more than two percent against the dollar in European trading hours, with the dollar-yen rate down to $1 = 155.74 yen from $1 = 158.89 yen on Wednesday.
Market analysts point to renewed speculation of a Bank of Japan intervention and expectations of a hawkish BoJ hike as factors contributing to the yen's increase. The Bank of Japan and the US Treasury intervened in July, but their efforts had a short-lived effect.
The large difference between Japanese and US interest rates is another factor driving the yen's softness, encouraging investors to borrow in yen and invest in higher-yielding US assets through a carry trade. With the possibility of a Fed rate hike later this month, the Bank of Japan faces pressure to raise rates to support the yen.
Wall Street stocks also rallied on Thursday, with the Nasdaq Composite Index rising 1.4 percent as investors bet on a dovish Federal Reserve. US jobs data and inflation update are scheduled for release next week, which could provide more clarity on the Fed's interest rate decision.