In the light market environment during the Japanese holiday, the yen fluctuated sharply, with the yen/dollar exchange rate rising by more than 2% on Monday, after falling 1.2% against the U.S. dollar to $160.17.

Analysts believe the scale and speed of the rally smacks of intervention, but Japan's top monetary official, Masato Kanda, declined to comment, keeping investors guessing. Citing people familiar with the matter, Dow Jones said authorities stepped in to buy yen.

"The market is very volatile and there's not a lot of liquidity, and the yen becomes a sharp toy. The risk of intervention is another factor," said Rodrigo Catril, a strategist at National Australia Bank.

Whether or not the government is involved , markets are clearly nervous about the possibility of intervention if the yen falls, but are also aware that the Fed may push the dollar back higher this week by becoming more worried about inflation.



The yen/dollar exchange rate has fallen more than 9% this year, and if it falls further to 160.2, it will hit the lowest level since 1986. Finance Minister Shunichi Suzuki said officials had repeatedly warned that if the devaluation was too deep or too fast, it would not be tolerated. said last week that he was worried about the impact of the weakening yen on inflation. A lower exchange rate makes imports of energy, food and other products more expensive, hitting consumers and businesses.

"We cannot ignore the negative impact of excessive and abnormal exchange rate fluctuations caused by speculation on the national economy," Kanda said on Monday. "Therefore, we will continue to take appropriate measures as needed."

However, the intervention in currency markets did not change the interest rate gap between the United States and Japan that has been weighing on the yen. Others argue that a weaker exchange rate is not necessarily a bad thing for Japan, as it can boost economic growth by boosting exports and tourism, while also increasing the value of overseas assets held by local investors.

Tony Sycamore, a market analyst at IG Australia in Sydney, said: "This move has all the hallmarks of actual intervention by the Bank of Japan, and now is the perfect time to intervene." The Japanese public holiday means that the dollar is against The decline in yen liquidity has a bigger impact on the Bank of Japan's dollar.

Kyle Rodda, a strategist at Capital.com in Melbourne, said trading was "pretty crazy" as investors rushed to cover short positions. Speculative traders seek to profit from volatility.