(Bloomberg) -- The yen jumped against the dollar in New York trading Monday after touching its weakest point this year, spurring speculation among analysts that it was partly the result of options positioning rather than Japanese authorities stepping into the market.

Japan’s currency touched a year-to-date low of 151.91 per dollar, then abruptly strengthened to the 151.21 level before reversing much of the gain. The net result is that the yen was little changed on the day, leaving it down some 13% this year, the worst performance of any Group-of-10 currency.

  

“I suspect it is the market doing it to itself, with the fear of BOJ intervention,” according to Marc Chandler, chief market strategist at Bannockburn Global.

He likened it to an episode in early October, when the currency saw a similarly sudden bout of strength in New York trading, triggering a debate over whether Japan had intervened.

The currency traded around the 151.70 level early Tuesday in Asia.

The yen has been mired in a trend of sustained depreciation, driven by a persistently wide interest-rate gap between Japan and the US. The Bank of Japan further loosened its grip on government bond yields on Oct. 31, but stuck with its negative interest-rate policy, a decision that underwhelmed traders looking for a trigger to drive a sustained yen rebound. 

The Federal Reserve, meanwhile, is saying it may lift rates again after hiking them to the highest in more than two decades, a dynamic that has fueled broad dollar strength this year.

The yen’s decline this year has fed into an inflation rate that has been above the BOJ’s 2% target since April 2022, putting pressure on it to normalize monetary policy.

Low volatility in foreign-exchange rates has also encouraged so-called carry trades, a strategy that involves raising money in yen and selling it for higher-yielding currencies, another factor that’s weighed on the Japanese currency. 

Options Expiry

The sharp, brief rally in the yen began around 10 a.m. New York time. Approximately $1.25 billion in yen options expire Monday at the 152 per dollar level, likely contributing to any sudden movements in the currency around the key level, Chandler said. 

Japan’s finance minister, Shunichi Suzuki, said Monday that policymakers would respond as needed to sudden moves in the yen. The nation’s top currency official, Masato Kanda, said on Nov. 1 that authorities were “on standby,” when asked if he was prepared to intervene in the currency market or take other measures to curb the yen’s slide.

“In our view, this is again just reflective of a market that is cautious about potential BOJ intervention as opposed to actual involvement,” said Simon Harvey, head of foreign-exchange analysis at Monex Europe. 

“We saw similar sharp retracements last month around the 150 handle, with the BoJ official intervention data showing no ultimate involvement,” he said. “The move today looks similar in terms of volume and range to these instances in early October.” 

--With assistance from George Lei, Robert Fullem and Lisa Wolfson.

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