Asian shares jumped this morning, lifted by surprisingly strong manufacturing data from China, while the dollar shot up from a 15-year low against the yen, stirring speculation of Japanese intervention.
But the US currency quickly gave up its gains, with traders saying the move was likely caused by a trading glitch rather than intervention. The Japanese Finance Ministry declined to comment on the incident.
The MSCI Asia share index outside Japan rose 1.6 per cent, led by gains in Hong Kong and Shanghai, after data showed China's official purchasing managers' index (PMI) for manufacturing rose to a six-month high in October.
The PMI rose to 54.7 in October from 53.8 in September, higher than every individual forecast. HSBC's China PMI also hit a six-month high last month.
But Japanese shares, Asia's worst performer this year, eased a touch as the yen's strength weighed on exporters.
The Nikkei is down 13 per cent for the year, compared to an 11 per cent rise in the MSCI index.
Speculation about possible Japanese intervention kicked in after the dollar spiked as far as 81.60 yen on trading system EBS in a matter of seconds, from 80.40 before, and compared to a 15-year low of 80.21 hit in early trade.
But by mid-morning Asian trade, the yen had recovered to 80.67, within a close distance of its post-war record low of 79.75.
"Judging from the price action, the market probably doesn't think right now there had been any intervention," said a trader at a major Japanese bank.
Currency investors have been on edge about possible intervention from Tokyo after it intervened to sell the yen in September for the first time in six years to pull the dollar from a 15-year low.
Reuters