On Thursday, the Japanese government intervened in the foreign exchange market for the first time in nearly two years, buying yen and selling US dollars after the USD/JPY pair broke through the 160 mark, as confirmed by both Reuters and the Nikkei newspaper [1][2]. This intervention caused the US Dollar Index (DXY) to tumble sharply, reaching seven-day lows around 98.00–98.10, and led to a dramatic drop of over 400 pips in USD/JPY, which plummeted toward the 156.50 price zone [1][2].
The intervention triggered significant moves across major currency pairs. The Australian Dollar (AUD/USD) surged more than 1%, reclaiming the 0.7200 level after hitting a daily low of 0.7110, and was up 1.17% against the US Dollar on the day [1][2]. The US Dollar weakened broadly, with the DXY falling 0.91% and the USD losing ground against all major currencies except the Euro, against which it was down 0.46% [1][2].
Despite solid US economic data, the Greenback's decline dominated market sentiment. US GDP grew at an annualized rate of 2% in Q1 2026, below the 2.3% estimate but an improvement from the previous quarter [1][2]. US initial jobless claims for the week ending April 25 dropped to 189,000, the lowest in nearly 60 years and below the expected 215,000 [1][2]. The Federal Reserve's preferred inflation gauge, Core PCE, rose by 3.2% year-over-year in March, up from 3% and marking its highest level in almost three years [1].
In Australia, the Consumer Price Index (CPI) rose by over 4.1% in Q1 2026, up from 3.6%, and money markets are pricing in a 70% chance that the Reserve Bank of Australia (RBA) will raise rates to 4.35% at its May 5 meeting [1]. The AUD/USD technical outlook remains bullish, with the pair trading at 0.7201 and supported by upward trend-lines and moving averages [1].
Looking ahead, the US economic calendar features the ISM Manufacturing PMI for April, expected to expand to 53 from March's 52.7, while Australia will release its Producer Price Index (PPI) for Q1 2026 [1].
CONCLUSION
Japan's rare FX intervention sent shockwaves through currency markets, sharply weakening the US Dollar and boosting the Australian Dollar. Despite solid US economic data, the intervention overshadowed fundamentals, with markets now focused on upcoming central bank decisions and economic releases.