By Sinéad Carew and Iain Withers
NEW YORK/LONDON Jan 23 (Reuters) – Japan’s yen spiked sharply higher against the dollar on Friday as traders evaluated the possibility of an intervention by Japanese authorities to support the currency while oil prices rallied after U.S. President Donald Trump ratcheted up pressure against Iran.
Elsewhere, safe-haven gold was trading at record highs and MSCI’s global equities gauge was modestly higher after a choppy week while US Treasury yields edged up.
The yen was volatile, with two sudden spikes raising market speculation that authorities had conducted a rate check that is often a precursor to intervention.
The Japanese currency suddenly swung from a loss to a gain versus the dollar earlier in the day and in afternoon U.S. trading it sharply extended gains. Earlier the Bank of Japan had signaled readiness to continue raising still-low borrowing costs in a politically-charged atmosphere, ahead of a snap election next month.
The jury was out among strategists on whether the afternoon move reflected an actual intervention or investor positioning for one. Earlier, Japanese Finance Minister Satsuki Katayama said she was watching currency markets closely, but declined to comment on speculation.
“I’m not hearing confirmation of official buying activity yet, but if it looks like an intervention duck, walks like an intervention duck, and quacks like an intervention duck, it’s probably an intervention duck,” said Karl Schamotta, chief market strategist at Corpay in Toronto.
“The dollar is declining in a broad-based manner, but the yen’s move in the last few hours has been uniquely rapid and significant, suggesting that Japanese authorities are stepping in — or that traders are front-running an expected move.”
The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, fell 0.61% to 97.70.
Against the Japanese yen, the dollar weakened 1.53% to 155.98. The euro was up 0.37% at $1.1797 and sterling strengthened 0.81% to $1.3607.
In stocks, after two days of gains, Wall Street equities suggested a muted end to a week punctuated by a sell-off then a relief rally linked to Trump’s withdrawal of tariff threats and ruling out seizing Greenland by force. Investors are still waiting for details of Greenland negotiations between the U.S. and European leaders.
With a busy week ahead, including a Federal Reserve meeting, key economic releases and earnings reports, Gene Goldman, chief investment officer at Cetera Investment Management in El Segundo, California said that investors were taking a “wait-and-see approach.”
The CIO also noted that traders may be wary of the potential for market moving weekend news after last weekend’s comments from Trump pushed stocks lower at the start of the week.
In energy markets, oil prices settled up almost 3% after rising to their highest in more than a week after U.S. Trump ramped up pressure on Iran through sanctions on vessels that transport its oil, and an announcement that an “armada” was heading towards the Middle Eastern nation. The pressure served as warnings to Tehran against killing protesters or restarting its nuclear program.
U.S. crude settled up 2.88%, or $1.71, at $61.07 a barrel while Brent settled at $65.88 per barrel, up 2.84%, or $1.82 on the day.
Fed funds futures are pricing an implied 97% probability that the U.S. Federal Reserve will hold rates steady next week, according to the CME Group’s FedWatch tool.
With Thursday night’s disappointing forecast pushing down Intel shares on Friday, investors were awaiting reports from megacaps Microsoft, Meta Platforms and industrial giant Caterpillar among others next week.
Investors were also waiting for results from U.S.-brokered trilateral talks over the Russia-Ukraine war. Negotiators met in Abu Dhabi on Friday to tackle the vital issue of territory, with no sign of a compromise, as Russian airstrikes plunged Ukraine into its worst energy crisis of the four-year war.
On Wall Street at 02:50 p.m. (1950 GMT), the Dow Jones Industrial Average was down 319.00 points, or 0.65%, to 49,064.56, the S&P 500 rose 2.76 points, or 0.04%, to 6,916.26 while the Nasdaq Composite rose 83.30 points, or 0.36%, to 23,519.32.
MSCI’s gauge of stocks across the globe rose 3.26 points, or 0.31%, to 1,039.29.
Earlier the pan-European STOXX 600 index finished down 0.1% and snapped a five-week winning streak, which was its longest since May. Despite a mid-week rebound, the index closed 1.1% lower for the week as investor sentiment was soured by flaring geopolitical uncertainties.
In precious metals markets, silver and gold set new records with silver prices rising above $100 an ounce for the first time and gold hitting another record and en-route to $5,000/oz as investors continued to pile into safe haven assets amid geopolitical turmoil.
Spot gold rose 0.95% to $4,983.42 an ounce. U.S. gold futures rose 0.55% to $4,936.00 an ounce.
Elsewhere in metals, copper rose 2.92% to $13,128.50 a tonne. Three-month aluminum on the London Metal Exchange rose 1.31% to $3,173.50 a tonne.
In Treasuries, the yield on benchmark U.S. 10-year notes fell 0.8 basis points to 4.243%, from 4.251% late on Thursday while the 30-year bond yield fell 1.3 basis points to 4.8356%.
The 2-year note yield, which typically moves in step with interest rate expectations for the Federal Reserve, fell 0.9 basis points to 3.605%, from 3.614% late on Thursday.
(Reporting by Sinéad Carew, Karen Brettell in New York, Iain Withers in London and Gregor Stuart Hunter in Singapore, additional reporting by Naomi Rovnick; Editing by Jane Merriman, Kirsten Donovan and Nick Zieminski)
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