The yen shot up against the dollar on Wednesday, reaching a two-week high, after Bank of Japan Governor Haruhiko Kuroda said the real effective exchange rate shows the Japanese currency is “very weak’’.

The dollar fell as low as 122.77 yen, its lowest since May 27, and was last down 1.4 per cent on the day at 122.97, far below its session high of 124.63 in early afternoon in Tokyo.

Kuroda, addressing a lower house financial affairs committee, declined to comment on whether the yen’s current level reflects economic fundamentals.

“The market was caught long, so the dollar quickly sold off,’’ said Kaneo Ogino, director at Global-info Co in Tokyo, a foreign exchange research firm.

Non-farm payrolls report

The dollar had jumped to a 13-year peak of 125.86 yen on Friday after the May non-farm payrolls report showed an unexpectedly strong US jobs growth and gave investors reason to believe the US Federal Reserve remains on track to raise interest rates later this year.

The yen has fallen largely as a side-effect of the BoJ’s massive quantitative easing aimed at overcoming deflation. Some Japanese policymakers have recently expressed concern about the yen’s decline for fear this could raise import prices too quickly or become a source of trade friction.

Real effective exchange rate

The real effective exchange rate, which is the trade-weighted value of the yen versus other countries after adjustments for prices, shows that the yen is near its weakest level since the early 1973, according to BoJ data.

Earlier on Wednesday, Kuroda told Japanese lawmakers that the dollar may not necessarily rise versus the yen if the Federal Reserve raises interest rates as traders may have already priced the possibility of a rate hike into the market.

Core machinery orders

Data released early on Wednesday showed Japan’s core machinery orders unexpectedly rose 3.8 per cent in April from the previous month. Though that data set is volatile, it could be a sign that capital expenditure is gaining strength, and the Cabinet Office raised its assessment of machinery orders, saying they are recovering.

Dollar index

The yen’s sharp ascent helped push down the dollar index, which tracks the greenback against a basket of six major currencies, to 94.898, down 0.3 per cent on the day and well below Friday’s high of 96.909 after upbeat U.S. jobs data raised bets that the Fed will lift interest rates.

Greece debt talks

While hiking expectations remain intact in the long term, short-term market focus has turned again to Greece, whose talks in Brussels with creditors were expected to continue later on Wednesday, and have entered a decisive phase this week.

Greece’s deal with the European Union and IMF expires at the end of this month and it may not meet payments without a new deal.

“Failure to agree this week would likely make it difficult to have a smooth resolution before the end of June, partly because another extension of the programme would require the approval of some national parliaments,’’ strategists at Barclays wrote.

But European officials have expressed frustration with Greek negotiating tactics. While an agreement this week is possible, the two sides must first bridge the differences over a primary surplus target, European Commission Vice-President Valdis Dombrovskis had said on Tuesday.

A planned meeting between the leaders of Greece, France and Germany later on Wednesday was clouded by fears about whether Greece would be able to reach a deal this week.

The euro edged up about 0.1 per cent on the day to $1.1293, continuing to retrace from a 1.5 per cent plunge against the dollar on Monday that brought it to this week’s low of $1.1082.

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