The Japanese yen surged by 3% to a two-month high against the U.S. dollar on Thursday, potentially indicating government intervention after officials intensified verbal warnings against speculative moves.

This rally followed the yen's recent drop to a 40-year low of 163.94 per dollar. The dollar fell to a low of 157.96 yen on Thursday, and the DXY dollar index decreased by 1% to 99.890.

Japanese Finance Minister Satsuki Katayama reiterated last week, "Our policy stance has not changed at all. We stand ready to take appropriate and decisive action at any time if necessary." She reaffirmed this stance on Tuesday.

The yen has faced pressure due to safe-haven demand for the dollar amid Middle East tensions and concerns over a widening U.S.-Japan interest-rate gap.