The yen jumped over 1% on Wednesday after media reports the...

The yen jumped over 1% on Wednesday after media reports the Bank of Japan conducted a rate check in apparent preparation for currency intervention, while other majors tried to regain the ground they'd lost a day earlier on the surging dollar.

The dollar slid more than 1% JPY=EBS to 142.9 yen after the Nikkei website reported the rate check, citing unidentified sources. In a rate check, central bank officials call up dealers and ask for the price of buying or selling yen.

Reuters later confirmed the rate check with a market source.

Earlier in the day, the Japanese currency had softened to as low as 144.97 per dollar, extending its sharp decline from the day before when an unexpected rise in the U.S. consumer price index (CPI), likely leading to further aggressive rate hikes from the Federal Reserve, sent the greenback soaring.

The dollar index, which tracks the currency against six main peers =USD , jumped 1.5% on Tuesday, its largest daily percentage gain since March 2020.

Japanese Finance Minister Shunichi Suzuki told reporters on Wednesday that recent yen moves have been "rapid and one-sided", adding that yen-buying currency intervention was among the government's options should such moves continue.

"If the market continues to sell the yen, there is more pressure for the (Ministry of Finance) and BOJ to communicate to the market that the recent move has been too fast," said Masayuki Kichikawa, chief macro strategist at Sumitomo Mitsui DS Asset Management

However, actually intervening in support the currency would be a larger step.

"Currently, the dollar is becoming stronger and the yen weakening due to the big interest rate differentials between the United States and Japan, so it's hard (for intervention) to be effective. That's why I think it's better to wait," said Masafumi Yamamoto, chief currency strategist, Mizuho Securities.

"If the dollar rises above 145 yen, the possibility of intervention will rise to about 60% from 10% to 20% before, rather than becoming 100%."

The currency hit a 24-year low of 144.99 last week. As inflation is a small concern in Japan, authorities are keeping yields on Japanese government bonds pinned down to help with the economic recovery.

In contrast, the yield on two-year Treasury notes US2YT=RR , which typically reflects interest rate expectations, peaked at 3.804% on Wednesday, the highest since 2007. The 10-year yield US10YT=RR last stood at 3.4410%.

Financial markets now have fully priced in an interest rate hike of at least 75 bps at the conclusion of the Fed's policy meeting next week, with a 30% probability of a super-sized, full percentage-point increase, according to the CME's Fedwatch tool.

The change followed red-hot inflation figures. A day earlier, the probability of a 100 bps hike was zero.

Other currencies were still hunkered down after yesterday's battering.

The euro EUR=EBS managed to climb back above parity with the dollar to $1.0014, up 0.47%, but continued to reel from Tuesday's 1.5% fall, and was not far from last week's 20-year low of $0.9864.

The European Commission's unveiling of a series of proposals to curb the energy price spike that has rocked Europe and weakened the euro, also gave the common currency some support.

Sterling GBP=D3 which lost 1.6% on Tuesday, was up 0.43% at $1.1543 after lower fuel prices caused an unexpected fall in British inflation in August, according to figures released Wednesday.

The risk-sensitive Aussie AUD=D3 was flat at $0.67375, after a precipitous 2.26% slide overnight. Bitcoin BTC=BTSP , which also moves in line with investors' attitude to riskier assets, was steady at $20,300 after losing 9.9% on Tuesday.

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