Reports that the Federal Reserve Bank of New York had checked in with traders about the yen's exchange rate sparked a surge in the Japanese currency, according to Bloomberg, pushing it up more than one percent to 153.89 per dollar -- its strongest level since November.
The yen has been sliding amid worries about Japan's fiscal position, the central bank's decision not to hike interest rates further and expectations that the US Fed will hold off cutting its own borrowing costs this week.
The last time Japanese authorities stepped in to support their unit was in 2024 when it hit 160 to the greenback.
The prospect of authorities stepping into financial markets saw the dollar retreat across the board, with the euro, pound and South Korean won also well up while the Singapore dollar hit an 11-year high.
That in turn sent gold prices surging almost two percent and past $5,000 for the first time.
Talk of joint intervention was fanned Monday by top currency chief Atsushi Mimura, who said Tokyo "will continue responding appropriately against FX moves, working closely with US authorities as needed, in line with the joint statement issued by the Japanese and US finance ministers last September".
His remarks came a day after Japanese Prime Minister Sanae Takaichi warned: "We will take all necessary measures to address speculative and highly abnormal movements."
Stephen Innes at SPI Asset Management said: "Early Asia saw the dollar pushed lower as rate-check chatter swirled around the Fed, and intervention-tinged language out of Tokyo reminded the market that yen weakness is no longer a free carry.
"In thin early Asian liquidity, the yen jumped, and that was enough to knock the broader dollar back into the Asia open."
- Eyes on Fed meeting -
Lloyd Chan, at MUFG, added: "The balance of risks may point toward dollar vulnerability and heightened two-way volatility in USD/JPY as markets navigate intervention uncertainty and evolving policy expectations around BoJ policy stance and Japan Prime Minister Takaichi's fiscal policy."
The weakening dollar helped send gold to a peak of $5,088.52 per ounce. Silver broke $100 Friday and spiked above $108 this week.
The precious metals have been hitting multiple records of late owing to a rush into safe havens by traders spooked by rising geopolitical concerns, including Donald Trump's intervention in Venezuela and a recent warning to Iran.
Strong central bank demand and elevated inflation have added to the mix, along with fresh worries of another US government shutdown.
"Over the past few days, gold's price action has been textbook safe-haven behaviour," said Fawad Razaqzada, market analyst at Forex.com.
"Underlying demand for protection is still there. Confidence in the dollar and bonds look a bit shaky."
The latest developments come ahead of the Fed's next policy meeting this week, which is expected to see officials stand pat on rates, having cut in the past three.
"We don't expect to learn a lot at the January FOMC meeting. The Fed is on hold but remains data dependent. The balance of risks around the two mandates hasn't changed much since December," wrote Bank of America economists, referring to the bank's goal of keeping a cap on inflation and supporting the jobs market.
"Chair Powell's press conference might be dominated by questions about politics rather than policy. On the latter, however, market pricing creates risks of a dovish surprise."
Trump has made no secret of his disdain for Powell, claiming there is "no inflation" and repeatedly questioning the Fed chair's competence and integrity.
Equity markets were mixed after a soft lead from Wall Street on Friday.
Tokyo sank almost two percent owing to the stronger yen, which weighs on Japanese exporters, while Singapore, Seoul and Wellington also retreated.
Hong Kong, Shanghai, Taipei and Manila rose.
Oil prices extended Friday gains of almost three percent that came after Trump said a US "armada" was heading toward the Gulf and that Washington was watching Iran closely.
The president has repeatedly left open the option of new military action against Tehran after Washington backed and joined Israel's 12-day war in June aimed at degrading Iranian nuclear and ballistic missile programmes.
- Key figures at around 0230 GMT -
Dollar/yen: DOWN at 154.36 yen from 157.00 yen on Friday
Euro/dollar: UP at $1.1867 from $1.1823
Pound/dollar: UP at $1.3671 from $1.3636
Euro/pound: UP at 86.81 pence from 86.70 pence
Tokyo - Nikkei 225: DOWN 1.9 percent at 52,812.45 (break)
Hong Kong - Hang Seng Index: UP 0.5 percent at 26,868.64
Shanghai - Composite: UP 0.4 percent at 4,151.35
West Texas Intermediate: UP 0.1 percent at $61.15 per barrel
Brent North Sea Crude: UP 0.1 percent at $65.91 per barrel
New York - Dow: DOWN 0.6 percent at 49,098.71 (close)
London - FTSE 100: DOWN 0.1 percent at 10,143.44 (close)
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