The Japan Times - Yen surges on new intervention talk, oil prices climb

Bond yields eased, however, and Wall Street and European stock markets traded higher.

The yen jumped more two percent against the dollar in European trading hours amid renewed speculation of another intervention to prop up the sagging currency, which increases import costs for Japan.

"The Japanese yen has emerged as the main story in FX markets today, with the currency sharply higher," said Fawad Razaqzada at Forex.com.

"Suspected BoJ intervention and, more likely, expectations of a hawkish BoJ hike have helped to lift the yen across the board," he added, referring to Japan's central bank.

The Bank of Japan and the US Treasury intervened in July to boost the yen, but its effect proved short-lived.

One reason behind the softness of the currency is the large difference between Japanese and US interest rates, which encourages investors to borrow in yen and then invest in higher yielding US assets in what is known as a carry trade.

With it possible the US Federal Reserve could hike interest rates at its meeting later this month, the Bank of Japan is also under pressure to raise rates to support the yen.

Investors are awaiting Friday's release of US nonfarm payrolls figures and the country's inflation update due next week to getter a better indication of whether the Fed will raise rates or not.

There are concerns for borrowers that central banks could enter a sustained round of interest rate increases as elevated oil prices due to the Mideast war push up wider inflation.

Those fears have seen yields on government bonds strike multi-decade highs this week as investors demand higher returns in anticipation of rate hikes, provoking further concern about whether governments can handle the higher cost of their large debt loads.

"The jump in borrowing costs can be blamed on many factors," said David Morrison, senior market analyst at financial services provider Trade Nation.

"These include investor concerns over high, and seemingly ever growing, levels of government debt," Morrison said.

He pointed also to "inflation fears linked to higher energy prices thanks to the US war with Iran".

The Islamic republic attacked US military bases in Kuwait on Thursday, despite President Donald Trump threatening further strikes in a fresh flare-up six months into the war.

The new clashes, which began with US raids on Sunday, deepen the impasse in the war, as Iran maintains a stranglehold on the strategic Strait of Hormuz and the US presses its counter-blockade of Iranian ports.

With the strait -- through which about a fifth of world oil and liquefied natural gas normally pass -- effectively closed and energy costs unlikely to come down markedly anytime soon, fears are growing that high inflation will settle in.

Crude futures had dropped earlier after Trump suggested that the United States' attacks against Iran would likely be short-lived, but they quickly turned higher.

- Key figures at around 1330 GMT -

Brent North Sea Crude: UP 0.7 percent at $96.31 per barrel

West Texas Intermediate: UP 1.1 percent at $91.97 per barrel

New York - Dow: UP 0.6 percent at 53,385.86 points

New York - S&P 500: UP 0.5 percent at 7,702.59

New York - Nasdaq Composite: UP 0.5 percent at 26,336.32

London - FTSE 100: UP 1.0 percent at 10,861.08

Paris - CAC 40: FLAT at 8,283.37

Frankfurt - DAX: UP 0.6 percent at 25,991.08

Tokyo - Nikkei 225: DOWN 0.2 percent at 64,214.48 (close)

Hong Kong - Hang Seng Index: DOWN 0.4 percent at 25,213.31 (close)

Shanghai - Composite: FLAT at 3,942.09 (close)

Dollar/yen: DOWN at 155.62 yen from 158.89 yen on Wednesday

Euro/dollar: UP at $1.1623 from $1.1584

Pound/dollar: UP at $1.3509 from $1.3484

Euro/pound: UP at 86.03 pence from 85.91 pence

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K.Yoshida--JT