FOREX: Yen jumps as traders eye further Japanese intervention

The yen leapt on Monday, keeping traders on alert for further intervention from authorities to shore up Japan's historically weak currency, days after Tokyo and Washington jointly intervened in the foreign exchange market.

The Japanese currency JPY= rose as much as 1% in the Asian morning to peak at 155.20 per dollar, its strongest level in about three months, before paring some gains. It was last 0.7% higher at 156.46.

The yen also advanced against other currencies like the euro and sterling, stirring speculation Japanese authorities could be in the market again.

"Given the magnitude of the move in USD/JPY and its timing, the possibility of intervention cannot be ruled out," Hirofumi Suzuki, SMBC's chief FX strategist, said of Monday's move.

"A substantial build-up of short yen positions had occurred, and the unwinding of these positions tends to accelerate yen appreciation. Market participants are also highly alert to the risk of such a move."

A trader, who declined to be named as they were not authorised to speak to the media, said there was a huge unwinding of yen shorts on Monday.

The yen's jump followed a more than 3% surge over two trading sessions at the end of last week. Japan's finance ministry confirmed it had engaged in joint yen-buying intervention with the U.S. on Friday, while Bank of Japan data showed Tokyo may have bought as much as $58.97 billion worth of yen on Thursday.

"History is clear, joint FX intervention packs a punch, and investors should lean with the official flow, not against it," said Elias Haddad, global head of markets strategy at BBH.

"Since 1998, all three coordinated U.S. FX intervention episodes were successful."

The yen has been under pressure for years now, undermined by the BOJ's gradual approach to monetary policy tightening, which has kept yield differentials between Japan and the rest of the world wide.

"Outside of a change in either the policy mix or global growth outlook, we think encouraging repatriation would be the most powerful policy for influencing the currency over a long period of time," Goldman Sachs analysts said.

DOLLAR UNDER PRESSURE

The latest bouts of yen-buying hammered the dollar, with the euro EUR= rising to a 1-1/2-month high of $1.1559 early in Asia on Monday, while sterling GBP= hovered near a two-week top at $1.3470.

The dollar index =USD was little changed at 99.70, having slid more than 1.5% last week.

A fall in oil prices also weighed on the greenback, after U.S. President Donald Trump said he had called off an attack on Iran and that talks between the two sides would happen on Monday.

In other currencies, the Australian dollar AUD=similarly rose to an over one-month high of $0.7069, while the New Zealand dollar NZD= scaled a two-month peak of $0.59075.

Investor focus this week will be on Friday's U.S. nonfarm payrolls data for clues on the health of the labour market and any influence the figures may have on Federal Reserve policy.

"A still-resilient labour market or signs that disinflation is stalling could increase pressure on the Fed to reinforce its anti-inflation credentials," OCBC analysts said.

"With two inflation reports and two employment releases due before the September FOMC meeting, incoming data will be pivotal, starting with this week's payrolls report."

-Reporting by Rae Wee; Editing by Jamie Freed and Stephen Coates/Reuters