Yen traders are bracing for US inflation data later Tuesday as a potential trigger to push the currency to a 33-year low and draw Japanese authorities into the market.

It is already trading at levels that saw intervention last year and on Monday came within a whisker of breaching the key 151.95 threshold versus the dollar. Japanese Finance Minister Shunichi Suzuki has warned repeatedly this week that the government will respond to excessive moves.

The wide gap between Japan’s ultra-low interest rates and those in the US has pushed the yen down all year, but in recent months the threat of action from Tokyo has tempered more aggressive bets against the currency. Strong US consumer price figures, however, would expand the yield differential even further, embolden bears to sell the currency and in turn increase the likelihood of yen purchases from Japan.

“Market participants are paying close attention to CPI, with any faster-than-expected inflation readings set to boost the risk of the dollar-yen pushing through 151.95 and accelerating upward,” said Juntaro Morimoto, a senior currency analyst at Sony Financial Group Inc. “Then intervention risk becomes real.”

Because the US inflation data are forecast to help cement the notion that global interest rates are peaking, any surprise in the numbers could have an outsized impact on currency markets. Bloomberg Economics has cited upside risks to CPI.

Upside Risk for US CPI Inflation With Sticky Core: Economics

Meanwhile, the options market is adding to the chances of choppy moves. Traders suggested the yen’s quick recovery from 151.91 on Monday probably reflected positioning in options. Heavy positioning now of options at a strike price of 152 brings the prospect of a similar snapback around that point, or even sharper yen depreciation on a move through this level.

It traded at 151.68 as of 3:54 p.m. in Tokyo.

“The yen’s still on a depreciation trend,” Julia Wang, global market strategist at JPMorgan Private Bank, said on Bloomberg Television. “The biggest reason is that the Bank of Japan is not taking a particularly proactive role in reining inflation.”

BOJ Governor Kazuo Ueda has signaled that a policy shift will be only gradual while he waits for the nation’s inflation target to come into sight.

While most economists expect a normalization step by April, Ueda has voiced his determination to continue with monetary easing until he can see a virtuous wage-inflation cycle.

--With assistance from Masaki Kondo and Hooyeon Kim.

(Adds latest prices, comment from strategist at JPMorgan Private Bank)