Yen surges back after hitting 34-year low as stocks rally

The yen has swung wildly as it surged soon after hitting a fresh 34-year low against the dollar.

On Monday, the yen slipped to 160.17 to the greenback in volatile morning trade, with liquidity thin amid a holiday in Japan. It later bounced back to 155.05.

The stock market in Japan was closed on Monday for a national holiday. However, some analysts speculated that Japan stepped in to boost the yen.

"I have no comment at this time," Masato Kanda, Japan's vice minister of finance for international affairs, told reporters at the ministry after the yen's sudden rise.

Meanwhile, the dollar's rally came as another forecast-topping US inflation report dented hopes for Federal Reserve interest rate cuts this year.

'Financial intervention'

The Yen currency has come under renewed pressure after the Bank of Japan refused to tighten monetary policy further at its meeting last week.

Officials have repeatedly said they are ready to step in if there are wild movements in the exchange rate, citing speculators as a key issue.

However, observers were sceptical that an intervention would have much of an impact.

"Expectations of intervention having a sustained impact may disappoint given macro fundamentals do not support a sudden shift to a hawkish monetary stance," said National Australia Bank's Tapas Strickland.

Lombard Odier's Homin Lee added: "Pressures will remain on the currency until we get more downbeat growth and inflation data in the US and clearer hawkish shift at the BoJ.

"We still think we are quite close to the Finance Ministry's intervention, in light of the recent rhetoric on excessive currency market moves."

Equity markets rose following a rally on Wall Street as strong earnings offset the hotter print on the personal consumption expenditures (PCE) price index.

"With all measures of US consumer prices showing a steep acceleration over the past three to four months, the (policy board) is bound to row back hard from its earlier predictions of meaningful policy easing this year," said Societe Generale economists.