The yen jumped to a more ‍than two-month high on Monday as speculation ‍mounted of coordinated currency intervention by authorities in the U.S. after remarks from Tokyo's prime minister and Japan's leading currency diplomat.

Investors also scaled back their dollar positions ahead ​of a Federal Reserve meeting and a possible announcement by the Trump administration of a new Fed chair.

The yen rose by as much as 1.5% to 153.30 per dollar, its strongest since early November. It ⁠was last at 153.97.

Tokyo continued to preoccupy investors after Japan's Prime Minister Sanae Takaichi said on Sunday her government would take the "necessary steps" against speculative market moves.

PRECURSOR TO INTERVENTION

A source on Friday told Reuters that ⁠the ‌New York Federal Reserve had checked dollar/yen rates with dealers, which is considered to be a precursor to intervention. The rush to exit short yen positions has lifted the currency by over 3% off Friday's low.

"Clearly if you've got both the MOF (Japanese Ministry of Finance) and the U.S. Treasury looking to limit the upside in dollar-yen, ⁠that's going to be a more powerful driver," said Dominic Bunning, head of G10 FX strategy at Nomura.

"It's going to have a more powerful impact on market behaviour than if it was just the MOF." Japanese Finance Minister Satsuki Katayama declined to comment on the rate checks, while currency diplomat Atsushi Mimura said the government would maintain close coordination with the United States on foreign exchange and act appropriately.

The U.S. has not joined a coordinated effort to intervene in the Japanese currency since March 2011, when it sold yen following the Fukushima earthquake.

The yen ⁠is under pressure in part because of concerns over Japan’s government ​debt that stands at more than double its economic output. A historic rise in market interest rates has raised fears for Japan’s ability to service its debt, but Takaichi has said she will cut taxes as she campaigns ‍for a snap election on February 8.

The yen had its largest one-day gain on the dollar for nearly six months on Friday, with spikes in late Asia trade and again in the New York session. Bank of Japan money market data on Monday ​indicated that a spike in the yen rate against the dollar on Friday was unlikely to be the product of official Japanese intervention.

The U.S. dollar index, which measures the currency's strength against a basket of six currencies, was down 0.1% at a four-month low of 97.14.

DOLLAR SELLOFF BOOSTS EURO AND STERLING

Spillover dollar selling on Monday helped push the euro and the British pound to four-month highs, while the Australian dollar hit its strongest since September 2024.

The euro was last up 0.2% at $1.1854, sterling was 0.1% higher at $1.3659, while the Aussie advanced 0.4% to $0.6922.

"The dollar has been fragile anyway, but the gain in the yen has been the precipitating trigger for the market to sell it across the board," said Marc Chandler, chief market strategist at Bannockburn Capital Markets in New York.

"There are a lot of things going on right now in the U.S. like the protests against the latest Minnesota shooting. Trump could also be naming the successor to Jay Powell this week. So the markets are nervous about both." U.S. President Donald Trump said on Thursday he would soon announce his pick for the next Federal Reserve chair, to replace Chair Jerome Powell, with BlackRock's Rick Rieder now ⁠favourite on betting site Polymarket with a 48% probability.

The U.S. Federal Reserve sets interest rates on Wednesday, with markets expecting no ‌changes but for policymakers to flag further cuts, with about 50 basis points of easing priced in for the year. Precious metals scaled new highs, with gold surpassing $5,100 per ounce to hit a record along with silver.

"There is potentially something larger at play here," said David Forrester, senior strategist at Credit Agricole in Singapore.

"The threat of intervention reflects a broader investor concern that Japanese and U.S. authorities would ‌like a weaker USD," he ⁠said. "This combined with Trump's erratic policy-making, including the threat of 100% tariffs on Canadian exports if it signs a trade deal with China, is weighing on the appeal of USD assets."

(Reporting by Samuel Indyk in ⁠London, Gregor Stuart Hunter and Tom Westbrook in Singapore and Gertrude Chavez in New York; Editing by Jamie Freed, Shri Navaratnam and Toby Chopra)