The Japanese Yen (JPY) continued to weaken on Monday, with the US Dollar (USD) appreciating above the 157.00 level and the AUD/JPY pair posting modest gains around 113.70, up 0.13% on the day [1][2]. The Yen's decline is attributed to a combination of rising oil prices and persistent concerns over Japan's economic outlook. Oil prices surged after US President Donald Trump rejected Iran’s peace proposal, with West Texas Intermediate (WTI) climbing about $3 to $94.50 and Brent Oil surpassing $100 per barrel [1][2]. This development has heightened inflationary pressures and supported the US Dollar, while Japan’s reliance on energy imports has left the Yen particularly vulnerable to higher energy costs [1][2].
On the policy front, the Reserve Bank of Australia (RBA) raised its policy rate to 4.35% last week, matching its December 2024 peak and marking the third consecutive hike this year as Australian inflation remains elevated [2]. The RBA projects the policy rate could reach 4.7% by year-end, with no cuts expected until 2028, further supporting the Australian Dollar (AUD) [2]. HSBC noted that the AUD has been among the best-performing G10 currencies this quarter, buoyed by the RBA’s hawkish stance and improving global risk sentiment [2].
Intervention risks remain a key factor for the Yen. Reports from Reuters suggest that the Japanese Ministry of Finance may have spent nearly JPY 10 trillion (USD 63.7 billion) in several interventions since April 28, while other reports estimate interventions during Golden Week at between ¥4 trillion and ¥5 trillion [1][2]. Japan’s top foreign exchange official, Atsushi Mimura, stated that further interventions remain possible if necessary [2]. US Treasury Secretary Scott Bessent is scheduled to visit Tokyo next week to discuss the Yen’s weakness, with Japanese authorities seeking US support to counter speculative moves [1].
Additionally, positive Chinese economic data, including a 1.2% YoY rise in the Consumer Price Index (CPI) and a 2.8% jump in the Producer Price Index (PPI) for April, have bolstered sentiment for the AUD, given Australia’s export ties to China [2]. The AUD is also benefiting from expectations surrounding President Trump’s upcoming visit to China from May 13 to May 15, where discussions with President Xi Jinping are expected to address Middle East tensions, Taiwan, artificial intelligence, and critical minerals [2].
CONCLUSION
The Japanese Yen remains under significant pressure due to surging oil prices and a strong US Dollar, while intervention risks from Japanese authorities are capping further losses. Meanwhile, the Australian Dollar is supported by a hawkish RBA and positive Chinese economic data. Market participants are closely watching for potential further interventions and upcoming diplomatic developments that could influence currency movements.