Yen Volatility Sparks Market Speculation

The global financial markets experienced significant volatility, with the Japanese yen's fluctuations taking center stage. The yen swung between gains and losses against major currencies, fueling speculation about potential intervention by Tokyo to support the currency following a cooler-than-expected U.S. inflation report.

The dollar was last up 0.23% at 159.24 yen, after experiencing sharp movements throughout the day. Similar volatility was observed in other yen crosses, with the euro and sterling also showing choppy trading patterns against the Japanese currency.

Speculation is rife that Japanese authorities intervened in the currency market, as the yen surged nearly 3% against the dollar at one point after the release of U.S. inflation figures. The dollar with a 1.7% loss against the yen, its largest daily decline since May.

In the broader market, Asian stocks were on track for a weekly gain, buoyed by growing expectations of a September rate cut from the Federal Reserve. These expectations were reinforced by U.S. consumer price figures and comments from Fed officials expressing confidence in inflation control.

Market pricing now indicates over a 90% chance of a Fed easing cycle beginning in September, up from just over 50% a month ago.

In China, export data showed an 8.6% increase in June from a year earlier, while imports unexpectedly shrank by 2.3%. Chinese markets showed little reaction to these figures.

Other major currencies saw modest movements, with sterling near a one-year high against the dollar and the euro making slight gains.

Oil prices rose on signs of strong summer demand and easing inflationary pressures in the United States. Brent futures and U.S. West Texas Intermediate crude both saw modest increases.

The volatile market conditions reflect ongoing uncertainty about global economic recovery, monetary policy directions, and geopolitical tensions.