By Peter Nurse
Investing.com: The U.S. Dollar edged higher in European trading Monday morning, absorbing a suspected intervention by Bank of Japan. Sterling was also higher as Rishi, the former finance minister, looked set to become Britain’s prime Minister.
At 02:55 ET (6:55 GMT),, which tracks the greenback in relation to a basket of six currencies, rose 0.1%, to 112.123.
Many of the overnight forex market action was centered around the pair.
The Financial Times reported the Bank of Japan may have sold at least $30 billion on Friday in an effort to support the yen, and the pair’s volatile movements early Monday action strongly suggested that the Japanese authorities had been in again.
USD/JPY fell to a low of 149.68 and then jumped to 145.28 in just minutes. This suggested intervention. However, it has since rebounded to 149.20, which indicates that the Japanese authorities still have a lot to do to curb the demand for the dollar against the beleaguered Japanese yen.
“Japanese authorities are indeed in an uneasy position,” said analysts at ING, in a note. “We can easily see their interest in not drawing a line in the sand at 150.00 given the very elevated market volatility, but allowing the yen to break higher risks generating those sharp sell-offs in the currency that Tokyo wanted to curb in the first place.”
“Unless the Bank of Japan shifts to a less dovish stance (no hints of this happening so far), FX interventions remain the most viable option,” ING added.
Elsewhere the index rose 0.4% to 1.1347 after Boris Johnson, former prime minister, pulled out of the race to replace Liz Truss. The Conservative Party will announce its new leader and PM later Monday.
Johnson’s decision means that former finance minister Rishi Sunak, seen as the most fiscally prudent option, is likely to win power. His appointment would reduce the political uncertainty that hangs over the pound for a short time.
slipped 0.2% to 0.9843 ahead of Thursday’s , which is expected to result in another 75 basis points hike as the central bank seeks to curb rampant inflation.
Falling 0.9% to 0.6322, 0.3% to 0.5731, weighted by waning risk sentiment, while rising 0.2% to 7.2553, as doubts increase about the strength and recovery of the Chinese economy.
Although delayed data showed that the Chinese economy grew 3.9% during the third quarter, surpassing forecasts of 3.5%; however, this was still lower than official forecasts and disappointed by a slight rise of 2.5%.