After spending weeks in the shadow of other currencies, the Japanese yen jumped back into the spotlight with a sudden rise that propelled it to a record against the dollar.
In a few seconds of trading shortly after 9 a.m. in New York, the yen moved to ¥75.78 per dollar from ¥76.22, a rise in the Japanese currency and weakening of the dollar. The surge drew comparisons to a previous, and even more significant, move in March, when the dollar fell by more than three yen within minutes. The previous intraday record of ¥75.94 was hit Aug. 19.
The ascent came after two months of relatively flat trading. Since mid-August, the yen has stuck to a narrow range, roughly between ¥76.50 and ¥77 to the dollar, even as the euro plunged to eight-month lows against the dollar and emerging-market currencies collapsed.
While the cause of the move isn't known, traders pointed to automatic buy orders that were triggered when the currency neared ¥76 against the dollar. The record points to investors' confidence that Japanese authorities aren't going to be able to prevent the yen from rising, and may not even try.
The yen's rise has been a source of consternation for Japanese officials for months. Two efforts to push down the currency by selling trillions of yen this year have failed. And Friday's move is another signal that traders believe the government has little power to reverse the trend. Signs emerged Friday that the government also may be coming to that conclusion.
Japan's cabinet passed a measure to increase the size of a fund announced earlier this year to help exporters hurt by the rising currency. As the yen rises, Japanese products become less competitive and any money they bring home is worth relatively less. Traders and analysts said they view the approval of the fund as a tacit acknowledgment that the government is resigned to living with the yen close to its current level.
"The Ministry of Finance is essentially throwing in the towel," said Paresh Upadhyaya, director of G-10 foreign-exchange strategy at Bank of America Merrill Lynch.
The government's latest move may have sparked some yen buying, traders said. As well, investors were selling dollars ahead of Sunday's gathering of European financial ministers, which has the potential to boost the euro at the greenback's expense if progress is made toward resolving the Continent's sovereign-debt crisis, traders said.
When the exchange rate neared ¥76 to a dollar, it triggered automatic trades, known as stop-loss orders, to buy yen and sell dollars, said Peter Gorra, managing director of foreign-exchange trading at BNP Paribas in New York.
There also may have been yen buying linked to currency derivatives that become profitable if the currency surges beyond ¥76, Mr. Gorra said.
That created an avalanche of buy orders. "Everyone was trying to do the same thing at the same time," Mr. Gorra said.
The yen retreated almost as quickly. Late Friday in New York, the dollar was at ¥76.26 compared with ¥76.79 late Thursday. The dollar also fell against major rivals. The euro was at $1.3896 compared with $1.3781. The pound bought $1.5953 compared with $1.5791, while the dollar fetched 0.8824 Swiss franc from 0.8938 franc late Thursday.
Still, a rally in the yen now appears more likely, traders said.
Any further Japanese intervention wouldn't come before meetings next week among European leaders over the region's debt crisis, analysts said. And, given that recent intervention efforts have been futile, any new measures are unlikely to have much impact, they said.
On Aug. 4, the Japanese government sold an estimated ¥4.513 trillion, nearly $60 billion at the time. That caused the yen to move to ¥80 against the dollar, a weakening, from about ¥77. But within a few days it was back at levels before the intervention.
