- Yen recovers from near 10-month low, down more than 1% for the week
- Takaichi's cabinet approves 21.3 trillion yen stimulus package
- Easing December Fed cut bets keeps dollar supported
LONDON, Nov 21 (Reuters) - The yen found some support on Friday as Japanese officials stepped up their verbal intervention to stem the currency's decline, while the dollar was a touch softer but on track for its first weekly rise in three weeks.
The yen popped higher 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.
"The warning overnight from the Japanese government was certainly a step up from what we've seen recently," said Lee Hardman, senior currency economist at MUFG.
"That's helping provide more support for the yen in the near term."
The Japanese currency rose 0.4% to 156.92 per dollar, though it remained close to Thursday's 10-month trough of 157.90 and was still on track to lose 1.5% 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 was pinned near its lowest since the introduction of the single currency and last stood at 181.04.
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.
"This was the last payroll report before the December Fed meeting and the report did not provide enough clarity for the Fed to cut in December," said Jefferies economist Mohit Kumar.
Kumar added that he expects the Fed to "skip" the December meeting but remain on an easing path.
Markets are now pricing in just a 27% chance of the Fed easing rates next month.
The euro stood at $1.1538 and was on track for a weekly decline of 0.7%.
It held steady after preliminary PMI data showed euro zone business activity grew steadily this month, even as manufacturing activity slipped into contractionary territory.
Sterling rose 0.2% to $1.3092, though it was set to lose 0.8% for the week, with investors anxiously awaiting Britain's upcoming budget, a major test for the nation's currency and bond markets.
The dollar index , which measures the greenback against a basket of other major currencies, flirted with a 5-1/2-month peak and last stood at 100.13.
The Australian dollar was up 0.1% at $0.6447 after sliding 0.6% on Thursday on a broad risk-off mood in markets. The New Zealand dollar rose 0.4% to $0.5605, having also lost 0.4% on Thursday.
The two Antipodean currencies were set for weekly losses of more than 1%.
In cryptocurrencies, bitcoin fell to a seven-month low of $82,032.
Reporting by Ozan Ergenay, Samuel Indyk and Rae Wee; Editing by Thomas Derpinghaus, Kirsten Donovan
Source: Reuters