The dollar jumped against the yen on Friday on talk Japanese authorities intervened in markets for the second time in just over a week to weaken a currency they fear is undermining the economic recovery.
Japan unleashed waves of yen selling on Sept. 15 — its first intervention to sell yen in six years — in a successful market operation to push the currency off a 15-year high against the dollar.
Authorities confirmed the last action, but on Friday Japan's top currency official Rintaro Tamaki declined to comment on whether Tokyo had stepped into markets again, Jiji news agency reported.
Prime Minister Naoto Kan, re-elected last week in a ruling party leadership election, is keen to curb rises in the yen to protect Japan's export-reliant economy, while he also struggles with a divided parliament and growing tensions with China.
The dollar rose to 85.40 yen from about 84.55 yen in a matter of minutes, and several traders said it looked like the Bank of Japan, which acts on behalf of the Ministry of Finance, had been selling yen. The Bank of Japan had no comment.
"Rather than saying clearly whether they did or not, they may be trying to make market players jittery," a trader for a Japanese brokerage house said.
The yen's fall was also fuelled by a market rumour that Bank of Japan Governor Masaaki Shirakawa might resign, which had encouraged some speculative buying of dollars, a dealer said, although traders were sceptical about the talk.
Dealers are waiting to see if Japan follows a similar intervention pattern on Friday to Sept. 15, when authorities intervened repeatedly through the Asian, European and U.S. trading day, selling an estimated 2 trillion yen ($23 billion).
The dollar has been under selling pressure on speculation the U.S. Federal Reserve will take more quantitative easing steps later this year to shore up the fragile U.S. economy.
Japan, which acted alone in last week's intervention foray, is concerned that the yen's climb is damaging an economy already mired in deflation, and had said it was ready to act again if confronted with rapid currency moves.
"If it is intervention then it has managed to prevent the yen from appreciating but the impact has stopped there — it hasn't succeeded in giving the dollar a strong boost," said Koji Ochiai, senior market economist at Mizuho Investors Securities.
"The dollar has risen above 85 yen but it is doubtful whether the authorities are willing to brush aside possible criticism from overseas and push it above 86 yen or 87 yen."
Finance Minister Yoshihiko Noda has said Tokyo must gain global understanding on its intervention, following concern among other nations about competitive devaluations.
Prime Minister Naoto Kan met U.S. President Barack Obama late on Thursday but the two did not discuss currency intervention, Kyodo news agency reported.
