FOREX-Traders on alert to yen intervention, dollar set for weekly gain

By Rae Wee

SINGAPORE, Nov 21 (Reuters) - The yen languished near a 10-month low on Friday but found some support as Japanese officials stepped up their jawboning to stem the currency's decline, while the dollar was on track for its best week in more than a month.

The yen briefly popped higher in early Asian trading after Japanese Finance Minister Satsuki Katayama said intervention was a possibility to deal with excessively volatile and speculative moves, leaving traders on alert for signs of yen buying from Tokyo.

That stemmed its decline, with the Japanese currency JPY= rising 0.2% to 157.12 per dollar, though it remained not far from Thursday's 10-month trough of 157.90. It was still on track to lose 1.6% for the week.

Much of the focus in currency markets this week has been on the yen, which has plumbed fresh lows as investors worry about the nation's worsening fiscal position brought about by Prime Minister Sanae Takaichi's lavish spending policies.

Takaichi's cabinet approved a 21.3 trillion yen ($135.40 billion) economic stimulus package on Friday.

"The elephant in the room now is mounting intervention risks," said Vishnu Varathan, head of macro research for Asia ex-Japan at Mizuho. "Interventions are likely to be opportunistic and short-lived. Essentially, speed bumps, not barricades."

Tokyo last spent 5.53 trillion yen, or nearly $37 billion, in July 2024 to intervene in the foreign exchange market to haul the yen away from 38-year lows.

Against the euro, the yen EURJPY= was pinned near a record low and last stood at 181.33. Sterling hovered near a 16-month high at 205.71 yen.

FED CUT BETS RECEDE

In the broader market, the dollar was set for a weekly gain as investors trimmed bets on further policy easing from the Federal Reserve next month.

The release of a delayed U.S. nonfarm payrolls report on Thursday painted a mixed picture of the country's labour market, showing employment growth accelerated in September, though the jobless rate rose to 4.4%, its highest level in four years.

That reinforced the view that the Fed is likely to refrain from cutting rates at its December meeting, as policymakers continue to navigate through an economic fog brought about by the U.S. government shutdown.

Against the dollar, the euro EUR= stood at $1.1542 and was on track for a weekly decline of 0.7%.

Sterling GBP= rose 0.2% to $1.3096, though it was set to lose 0.8% for the week, with investors also anxiously awaiting Britain's upcoming budget, a major test for the nation's currency and bond markets.

The dollar index =USD, which measures the greenback against a basket of peers, flirted with a 5-1/2-month peak and last stood at 100.07. It was on track to record a weekly gain of more than 0.8%, its best performance in over a month.

"The shutdown-delayed September jobs report did not provide clarity on what the FOMC will do at its much-debated December meeting," economists at Wells Fargo said in a note.

"We remain of the view that what the Fed should do is cut the federal funds rate by 25 bps ... That said, what the Fed will do is a separate debate entirely."

They added that their call for lowering rates in December was a "close" one and that a hold "would not surprise us at this point."

Markets are now pricing in just a 27% chance of the Fed easing rates next month. 0#USDIRPR

Elsewhere, the Australian dollar AUD= was up 0.2% at $0.6453 after sliding 0.6% overnight on a broad risk-off mood in markets. The New Zealand dollar NZD= rose 0.36% to $0.5602, having also lost 0.4% on Thursday.

The two Antipodean currencies were set for weekly losses of more than 1%.

In cryptocurrencies, bitcoin BTC= fell to a seven-month low of $85,350.75, while ether ETH= slid more than 2% to a four-month trough of $2,777.39.