The dollar was buoyant on Thursday, hovering at a near three-week high as Treasury yields rose and appetite for riskier currencies dimmed, while the yen briefly surged after breaching 150.50 per dollar, keeping traders jittery about intervention.
The Japanese yen JPY=EBS weakened to hit a fresh one-year low of 150.78 per dollar and was not far off the 32-year low of 151.94 it touched in October last year, which led to Japanese authorities intervening in the currency market.
It briefly strengthened sharply to 149.865 before rebounding to its current level at 150.50, but analysts said this was unlikely to be intervention.
"The move was less than one big figure. That tells me it wasn't intervention," said Niels Christensen, chief analyst at Nordea.
"If it had been intervention we would have seen a bigger move," Christensen added.
Japanese Finance Minister Shunichi Suzuki earlier warned traders against selling the yen again, saying authorities were closely watching moves.
"I'm watching market moves with a sense of urgency, as before," he told reporters at his ministry.
Suzuki made no direct comment about the potential for intervention.
A recent surge in global interest rates is heightening pressure on the Bank of Japan to change its bond yield control next week. A hike to an existing yield cap set three months ago was being discussed as a possibility, sources told Reuters.
Japan's low yields have made the currency an easy target for short-sellers and funding trades, with the widening gap in the interest rates between Japan and the United States leading to persistent weakness in the yen.
The yen has fallen over 20% since the U.S. Federal Reserve began rapidly raising rates to combat inflation in March 2022, while the BOJ remains an outlier among central banks and has stuck to its ultra loose monetary policy.
U.S. GDP data due later on Thursday is a key event risk for dollar-yen, according to Carol Kong, currency strategist at Commonwealth Bank of Australia, who said a strong report may pressure U.S. yields higher and result in the yen testing fresh lows.
Benchmark U.S. 10-year Treasury yields inched higher, resuming a move toward a 16-year peak above 5.0% briefly breached on Monday. The 10-year yield US10YT=RR was at 4.9616% on Thursday.
SPOTLIGHT ON ECB Investor focus will be on the policy decision from the European Central Bank later in the day, with the euro EUR=EBS touching a week low of $1.0533 earlier in the session. The single currency was last down 0.2% at $1.0545.
The ECB is expected to keep interest rates unchanged at a record high, snapping a 15-month streak of hikes. It may discuss a quicker reduction of its oversized portfolio of government debt as it battles excessive inflation.
"The bottom line is that they will signal they are done for now," Nordea's Christensen said.
"The euro is already on the defensive this morning and I think, if anything, the ECB will be more on the dovish side."
Sterling GBP=D3 was last at $1.2081, down 0.2% on the day, having touched a three-week low of $1.2070 earlier in the session.
Against a basket of currencies, the dollar =USD was 0.2% higher at 106.75 after touching a near three-week peak of 106.88.
The Australian dollar AUD=D3 slid to a one-year low of $0.6271 and was last flat at $0.6309.
A surprisingly high reading for inflation on Wednesday stoked expectations of a further hike in interest rates.
The head of Australia's central bank on Thursday said the strong third-quarter inflation report was around policymakers' expectations, and they were still considering whether it would warrant a rate rise.
The New Zealand dollar NZD=D3 touched a near one-year low of $0.5774 and was last unchanged at $0.5802.
The Canadian dollar CAD= fell 0.1% versus the greenback to 1.38 per dollar after the Bank of Canada on Wednesday held its key overnight rate at 5.0% as expected but left the door open to more rate hikes to tame inflation.
The Fed and the BOJ meet next week. In cryptocurrencies, bitcoin BTC= last rose 0.6% to $34,714. The world's largest cryptocurrency has surged 15% this week on the back of speculation that an exchange-traded bitcoin fund is imminent.
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