The Japanese yen soared on Thursday, experiencing its largest single-day gain since late 2022. Traders attributed the surge primarily to dollar selling triggered by a weak US inflation report. The report fueled expectations of an earlier-than-anticipated Federal Reserve rate cut, lessening the appeal of the US dollar.
Several analysts believe options-related activity, automatically triggered by the inflation report, also contributed to the yen’s rise. Additionally, investors unwound their short positions on the yen, which had been popular due to the interest rate differential between Japan and other countries. The potential for a narrowing interest rate gap between the US and Japan further supported the yen’s strength.
While some speculated about possible government intervention to support the yen, official confirmation remains absent. Most analysts attributed the surge to market forces, with weak US inflation acting as the key catalyst.