The Japanese Yen (JPY) experienced notable support at the start of the week, with market participants suspecting intervention by Japanese authorities after USD/JPY breached the key 160.00 threshold in thin Golden Week liquidity [2][3]. According to Reuters, the Bank of Japan (BoJ) may have spent approximately 5.48 trillion JPY to stabilize the currency, although the Ministry of Finance has not confirmed this action [2]. OCBC strategists noted that the sharp pullback in USD/JPY after breaking 160 likely reflected real JPY-buying intervention, and they expect that defending this level will require larger action if oil prices remain elevated [3]. They project USD/JPY could trade in the 150–155 range in the near term, maintaining an end-2026 target of 155, with a June BoJ rate hike now seen as likely, though policy is still considered behind the curve [3].
Geopolitical tensions in the Middle East, particularly between the US and Iran, have contributed to a risk-off environment, supporting both the US Dollar (USD) and the Japanese Yen [1][2]. The US Dollar Index (DXY) climbed above 98.00 after rebounding from 97.70 lows, as investors sought safe-haven assets amid escalating verbal tensions and US President Donald Trump's announcement of a plan to free vessels stranded in Iran, set to begin on Monday [1]. Tehran warned that any US military incursion into Iranian waters would be seen as a violation of the ceasefire and would be met with "full strength" [1]. These developments have pushed West Texas Intermediate (WTI) oil prices to just below $100, further dampening risk appetite and weighing on the Euro (EUR) and JPY [1][2].
In the Eurozone, the S&P Global Manufacturing PMI rose to 52.2 in April, its highest in nearly four years, signaling industrial expansion, while the Sentix Investor Confidence Index improved to -16.4 in May from -19.2, indicating a modest rebound in sentiment [2]. However, Germany's domestic performance continues to lag, creating internal divergences within the bloc [2]. The European Central Bank (ECB) is signaling a hawkish stance, with Governing Council member Peter Kazimir stating that policy tightening in June is almost certain due to persistent inflation, especially from energy prices [2]. The ECB Survey of Professional Forecasters expects inflation to average 2.7% this year, gradually returning to the 2% target, while GDP growth is forecast at 1% for 2026 [2].
Market attention is now focused on upcoming US Factory Orders for March and the highly anticipated April Nonfarm Payrolls report, following a hawkish tilt at the recent Federal Reserve meeting, where three members dissented against including an "easing bias" in the statement [1]. Meanwhile, the Japanese Yen was the strongest against the British Pound among major currencies today [2].
CONCLUSION
Suspected intervention by Japanese authorities has provided support for the Yen after USD/JPY breached 160, but ongoing geopolitical tensions and high oil prices continue to drive risk-off sentiment, benefiting both the USD and JPY. Analysts expect further intervention and a possible June BoJ rate hike, though policy remains behind the curve. The market remains cautious, with attention on upcoming US and ECB data and policy signals.