The yen rose sharply against the dollar on Thursday, in a move so rapid and large in its scale that it alerted traders to the prospect of intervention by Japan to prop up its weak currency.

Markets have been on alert for yen-buying by Japanese authorities, who have warned of action for months as currency weakness exacerbates the cost-of-living impact of rocketing energy import prices.

The yen is trading near 40-year lows against the dollar, pressured by Japan’s relatively low interest rates and as higher energy prices hit the nation’s terms of trade.

Dollar/yen was last trading at 158.61, down almost 3% on the day. The yen also jumped against the euro, sterling and Australian dollar.

Analyst Reactions

Neil Jones, Managing Director of FX Sales and Trading at TJM in London, said: “The 400 point sell off in the U.S. dollar-yen strongly suggest further official MOF intervention to me. The yen is outperforming across the board. This is more than just a weaker dollar.”

Yuji Saito, Executive Advisor at SBI FX Trade in Tokyo, noted: “This is clearly different from the kind of move you see when rate checks are conducted. Looking at the chart, the upside was capped two or three times before the dollar started falling. Given the circumstances, it is reasonable to think that intervention was likely conducted.”

Roberto Cobo Garcia, Head of G10 FX Strategy at BBVA in Madrid, added: “There has been a sharp move lower in dollar/yen that strongly suggests official intervention. The pair has broken below the 161 level, and it appears Japanese authorities have taken advantage of the bearish momentum generated by the weaker U.S. data to sell dollars and support the yen.”

Original reporting: Appleton, WI News Feed (HLL/CB) — read the source article.