The dollar dropped today after data showed headline consumer prices unexpectedly fell in June, while a sharp gain in the Japanese yen sparked speculation of a possible intervention in the currency.

The yen rose more than 2% at one point, after falling to a 38-year low against the greenback last week.

Local Japanese television station Asahi, citing government sources, said officials intervened.

Domestic news service Jiji cited top currency diplomat Masato Kanda as saying he could not comment on whether or not there was an intervention, but that recent moves in the yen were “not in line with fundamentals.”

It will not be known for certain whether an intervention occurred until Japan’s Ministry of Finance releases its updated figures on intervention at the end of the month.

Analysts noted that the move was likely caused by a large repositioning after the softer U.S. consumer price index (CPI) earlier today. A rate cut in September by the U.S. Federal Reserve is now seen as more certain, which will reduce the attractiveness of long dollar/yen trades.

Positioning in long dollar/yen trades and momentum indicators were also stretched heading into the data release, with many traders caught on the wrong side of the move.

“I think it was just the reaction to the weak U.S. CPI and the squeeze of the market long USD positioning. The USD weakened across the board, but more so against the JPY because of positioning,” said Athanasios Vamvakidis, global head G10 FX strategy at Bank of America Global Research in London.

Buying the dollar and selling the yen has been popular because of the wide interest rate differential between the two countries.

“A lot of this can be chalked up to a bit of unwind as people have been piling in to this carry trade,” said Michael Boutros, senior technical strategist at FOREX.com in New York.

The dollar index was last down 0.49% at 104.45 and earlier reached 104.07, the lowest since June 7.

Against the yen, the dollar was down 1.81% at 158.75 after hitting 157.4, the weakest since June 17. It traded as high as 161.76 earlier today.

Boutros noted that the dollar reached a key area of technical support against the yen, and will need to remain above that to maintain the upward dollar trend that has been in place since December.

Today’s consumer price data comes after Fed Chair Jerome Powell said this week he was not ready to conclude that inflation is moving sustainably down to 2% though he has “some confidence of that.”

Unexpectedly elevated inflation in the first quarter raised concerns that it will take longer for prices to recede than previously thought.

There have also been worries that it would be more difficult for inflation to continue to recede compared with 2023, following improvement in the second half of last year.

“The question was, could we match or beat it to keep the year-on-year disinflation path going down,” said Steve Englander, head of global G10 FX research and North American macro strategy at Standard Chartered Bank NY Branch, but “this was a pretty decisive” improvement.

The euro rose 0.34% to $1.0867 and reached $1.090, the highest since June 7.

Sterling hit an almost one-year high as comments from Bank of England policymakers and better-than-forecast GDP data led traders to reduce bets on an August rate cut in Britain.

BoE chief economist Huw Pill said on Wednesday price pressures remained persistent and data today showed British economic output increased by 0.4% in May, above expectations.

The pound was last up 0.51% at $1.2911 and reached $1.2947, the highest since July 27, 2023.

In cryptocurrencies, bitcoin gained 0.72% to $57,821.