British Pound spikes down agains Yen triggering intervention concerns

The British Pound (GBP) has spiked lower against the Yen (JPY) in Thursday’s early European session, with no clear reason to explain the move, triggering speculation of some action by the Japanese Ministry of Finance. The GBP/JPY pair has dropped from highs at 216.00 to 214.85 lows, although it returned above 215.00 shortly afterwards.

The pair moved in tandem with the USD/JPY, which dropped more than 130 pips in a matter of minutes to hit session lows at 161.13 before trimming some lows.

These moves come amid rising speculation about a potential intervention by Japanese authorities to stem Yen weakness, as the Japanese currency dove to its lowest levels in the last 40 years against the US Dollar (USD) this week.

The market, however, expects Tokyo to step in under more favourable circumstances to enhance the impact of the action. In that sense, a potential USD reversal after a dismal US Nonfarm Payrolls report or, else, the highly likely thin trading volumes on Friday, as US markets will be closed for the July 4 holiday, might provide optimal chances.

Earlier on the day, Toshihiro Nagahama, a key private-sector member on Japanese Prime Minister Takaichi's Council on Economic and Fiscal Policy, affirmed that he expects the Bank of Japan (BoJ) to hike interest rates again before the end of the year. This move, however, has been widely anticipated by the market and is unlikely to have triggered the Yen’s sudden recovery.