(Updated at 1010 EDT)
The yen hit an almost four-week high against the U.S. dollar on Friday, raising speculation that Japanese authorities may have intervened for a second day to prop up the currency.
The rally in the Japanese currency JPY=EBS , which has been languishing at around 38-year lows, began on Thursday just after data showed U.S. consumer prices for June eased, boosting the odds of the Federal Reserve cutting rates as soon as September.
On Friday, the move came after data showed that U.S. producer prices increased moderately in June.
James Malcolm, head of FX strategy at UBS in London, said Friday's move may have been a result of an intervention or of rate checking.
"They need to change tactics to keep the market on its toes and show they are serious. Looks like yesterday didn't cost them much. So this may ensure we close the week near the lows, which will put further technical pressure on the (dollar-yen) cross," he said.
The Bank of Japan sometimes calls dealers to ask for rate levels, which can indicate a potential intervention and itself cause market moves.
"You don't even have to come in big. You just have to make a few phone calls to make sure that it's well-known," said Lou Brien, market strategist at DRW Trading in Chicago.
Daily operations data from the BOJ on Friday suggested the central bank had spent between 3.37-3.57 trillion yen ($21.18 billion-$22 billion) on buying the yen on Thursday, less than three months after its last foray into the market.
Tokyo's top currency diplomat, Masato Kanda, said on Friday authorities will take action as needed in the foreign exchange market, but declined to comment on if authorities had intervened.
The dollar was last down 0.35% at 158.24 yen JPY=EBS after earlier reaching 157.3, the lowest since June 17.
Tokyo intervened at the end of April and in early May, spending roughly 9.8 trillion yen ($61.55 billion) to support the currency. There will be a month-end report from Ministry of Finance that will confirm the amount spent on any intervention.
However, the yen has since then gone beyond those levels, touching a 38-year low of 161.96 per dollar last week as the wide difference between U.S. and Japan rates weighed.
This gap has created a highly lucrative trading opportunity, in which traders borrow the yen at low rates to invest in dollar-priced assets for a higher return, known as carry trade.
A Fed rate cut will dent the appeal of this trade. "The Fed will lower interest rates in September, and together with the Bank of Japan's interest rate hike, the interest rate differential between Japan and the United States will narrow in both directions," said Takahide Kiuchi, executive economist at the Nomura Research Institute in Tokyo.
"This is expected to reverse the trend of the yen's weakening. This currency intervention will likely be effective in buying time until then," he said.
Traders are now pricing in 96% chance of the Fed cutting rates in September, compared with 73% before the CPI reading, the CME Group's FedWatch Tool showed.
In Japan, nearly 90% of households expect prices to rise a year from now, a quarterly central bank survey showed on Friday, a sign of heightening inflation expectations that could help make the case for a near-term interest-rate hike.
The dollar index =USD , which measures the U.S. currency against six others, was last down 0.14% at 104.19, not far from the one-month low of 104.07 it touched on Thursday.
The euro EUR=EBS was up 0.29% at $1.0896 after earlier hitting a one-month high of $1.0902.
Sterling GBP= strengthened 0.48% to a one-year high of $1.2971.
In cryptocurrencies, bitcoin BTC= gained 0.53% to $57,862.
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