The foreign exchange market experienced significant volatility following two consecutive days of intervention by Japanese authorities to halt the rapid depreciation of the Yen. The Bank of Japan disclosed that it spent approximately $35 billion USD in its latest intervention, just below the $36.8 billion used in July 2024, after the USD/JPY pair breached the 160.00 level before stabilizing around 156.67–156.72 by Friday's session close [1]. This intervention led to a broad-based weakening of the US Dollar, with the Dollar Index (DXY) falling to around 97.88–97.90, down roughly 0.22–0.23% on the day [2][3]. The US Dollar was noted as strongest only against the Japanese Yen, while it declined against other major currencies such as the Euro, Pound Sterling, and New Zealand Dollar [2][3].
The intervention coincided with geopolitical developments, as Iran submitted a new proposal to the United States via Pakistan, raising hopes for renewed peace talks despite ongoing tensions and US economic sanctions. This news contributed to a slight easing in oil prices and further pressured the US Dollar [1][2][3][4].
Major currency pairs responded sharply: GBP/USD surged past 1.3600, reaching 1.3650 and marking a ten-week high, up over 0.50% on the day, while EUR/USD hovered near its highest level in over a week at 1.1768 [2][4]. NZD/USD also firmed near recent highs around 0.5915–0.5930, up 0.10% [3]. The US Dollar's weakness was attributed both to the Japanese intervention and to mixed US economic data, including a steady ISM Manufacturing PMI at 52.7 for April (unchanged from March and slightly below expectations), and a Q1 GDP growth rate of 2%, which missed forecasts of 2.3% [1][2][3][4].
Central bank commentary added to market uncertainty. Federal Reserve officials expressed divergent views: Cleveland Fed's Beth Hammack and Minneapolis Fed's Neel Kashkari warned of broadening inflationary pressures and the risk of price shocks from geopolitical events, suggesting that an easing bias is inappropriate and that further tightening could be necessary if inflation expectations rise [1][2][4]. Dallas Fed's Lorie Logan stated the next policy move could be either a cut or a hike, emphasizing the Fed's data-dependent stance [1][2][4]. Across the Atlantic, ECB officials signaled a cautious approach, with some suggesting further rate hikes may be needed, while the Bank of England's Chief Economist Huw Pill indicated readiness to tighten policy in response to inflation risks from the Iran conflict [2][4]. Markets are currently pricing in 60 basis points of BoE rate hikes by year-end, while the Fed is expected to keep rates unchanged [4].
Technical analysis across the majors suggests the US Dollar remains under pressure, with key resistance and support levels identified for USD/JPY, GBP/USD, and EUR/USD. The absence of major Japanese economic data next week shifts focus to a busy US calendar, including Factory Orders, ISM Services PMI, and the April Nonfarm Payrolls report [1].
CONCLUSION
Japanese intervention to support the Yen triggered a sharp decline in the US Dollar against major currencies, amplifying volatility across FX markets. Mixed US economic data and divergent central bank outlooks further cloud the near-term direction for the Dollar. Market participants remain focused on upcoming US data and ongoing geopolitical developments for further cues.