The yen was at 154.245 to the dollar, which was set for a 2.5% loss for the week, its biggest weekly decline against the Japanese currency since late April-early May
The yen headed for its strongest week in almost three months on Friday as traders unwound long-held bets against the currency ahead of key U.S. inflation data that could help cement expectations for where Fed rates might head.
The yen has dominated the currency markets this month, soaring to an almost three-month high of 151.945 per dollar on Thursday after starting the month at a 38-year low of 161.96 per dollar.
On Friday, the yen was at 154.245 to the dollar, which was set for a 2.5% loss for the week, its biggest weekly decline against the Japanese currency since late April-early May, as a sell-off in global stocks drove investors into safe havens, including the yen.
The rally follows suspected interventions by Tokyo in early July that wrong-footed traders and led to an unwinding of profitable carry trades, in which traders borrow the yen at low rates to invest in dollar-priced assets for higher returns.
I think the speed of the yen rally means we are probably due some consolidation pretty soon, according to James Athey, fixed income portfolio manager at Marlborough Investment Management.
But ultimately with the shine coming off risk assets and data and Fedspeak indicating cuts are coming, I still feel the yen has further to appreciate, he said.
The Swiss franc, another carry-trade funding currency, has also benefitted. It has pushed the dollar lower by 0.9% this week to hit its strongest in more than four months.
It was 0.2% weaker on the day at 0.8834 francs.
The surge in the yen, though, may allow the central bank to take its time, though some analysts believe the rate element is only one side of the story.
The other is a consistent outflow of cash from Japanese markets, both from domestic and foreign investors, said BofA currency strategist Kamal Sharma.
What you are seeing is Japanese investors and foreign investors leaving the Japanese market and investing in global tech, predominantly. So unless whatever the BoJ does to persuade investors to come back into the Japanese asset market, it is very hard to make the case that the yen is in the midst of a turning point for now, he added.
