The Japanese yen rallied sharply during Thursday's trading after clear signs emerged that Japanese authorities may have intervened in the foreign exchange market to support the currency following an extended period of heavy losses.

In trading, the US dollar fell by as much as 3% against the yen to 158.34, after having climbed to its highest level in nearly 40 years earlier this week.

Suspected intervention

The immediate trigger for the sharp move was not immediately clear, and Japanese authorities have not confirmed whether they intervened in the currency market. However, investors have been anticipating official yen-buying operations for months.

Japanese officials have repeatedly warned that they were prepared to act against excessive weakness in the currency, which has increased the cost of living by driving up import prices, particularly for energy.

The move also came ahead of the Bank of Japan's policy meeting scheduled for Friday and only hours after the Federal Reserve left US interest rates unchanged, a decision that weakened the US dollar.

Although Japan spent more than $70 billion on dollar-selling and yen-buying interventions during April and May, those efforts have so far failed to provide lasting support for the Japanese currency.