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The yen had quite the rollercoaster ride on Friday, thanks to the Bank of Japan (BOJ) conducting those enigmatic "rate checks." This fueled suspicions that the authorities had a hand in Thursday's market antics, trying to bolster the currency.

In the morning trading session in Tokyo, the yen whipped around like a cat chasing its tail. A few market insiders whispered that the BOJ had been ringing up folks, asking for indicative exchange rates against the euro. Welcome to the return of Forex Friday Follies

This all came hot on the heels of a dramatic four-yen leap to 157.42 per dollar. The jump followed a surprisingly tame US inflation report. The trading volume spiked in a way that screamed "intervention!" to those familiar with the BOJ's past moves.

For those not well-versed in the BOJ’s playbook, rate checks usually come into play when the currency market starts acting like it's had one too many espressos (i.e. +161.50). When mere words can’t calm the storm, the BOJ might pick up the phone. The insiders who spilled the beans about Friday's rate checks preferred to stay in the shadows, given the hush-hush nature of these chats and the honor it is to be on BoJ's first call list.

For a bit of history, the last time we saw the BOJ dabbling in rate checks was in September 2022. That episode was swiftly followed by actual intervention a few days later. So, if history is any guide, we might soon be in for more yen drama on a trading screen near you in the coming days.

According to my FX Tokyo colleague, who asked not to be identified, EBS saw trading volumes in the hour following the inflation data that were on par with the year's earlier interventions. Initially, I mistook that spike for a prominent hedge fund making tactical moves based on the prospects of three US rate cuts, potentially influencing the GPIF’s (Government Pension Investment Fund) front running their 2025 rebalancing into the JPY a bit sooner than expected. There is no question they will front-run; it’s just a matter of when they start.

It also appears the BOJ is playing a strategic game. They seem intent on drawing a line in the Euro carry trade zone while subtly signaling that 160 USDJPY is still the line in the sand. This intricate dance shows that the BOJ is keen on maintaining control and keeping everyone on their toes. The carry trade has significantly pushed USDJPY higher since the last intervention

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