The yen eased slightly against the dollar on Friday, but was still poised for its steepest weekly gain in more than two months after Japanese authorities stepped in to lift the currency from near two-year lows.
Investors remained on high alert for further intervention from Japan’s Ministry of Finance (MOF), with May 1 holidays thinning markets and Tokyo heading into a three-day shutdown next week.
“The difficulty is they are sort of fighting against some underlying fundamentals there,” Ken Crompton, the head of rates strategy at National Australia Bank, said about Japan’s intervention efforts.
“The weak yen is probably there for a reason and how successful the MOF will be in fighting against the tide on a sustained basis is sort of hard to see at the moment,” he added.
The yen stepped back 0.25% against the greenback to 156.99 per dollar, but Thursday’s surge put the Japanese currency on course for a 1.8% jump this week, the most since mid-February.
The dollar index, which measures the greenback against a basket of currencies, was little changed at 98.14. The euro edged 0.03% lower to US$1.1727.
Two sources familiar with the matter told Reuters that officials had intervened to buy the yen, after it hit its weakest level against the dollar since July 2024. The sudden jolt in the dollar-yen rate occurred in London trading hours and followed earlier comments from Japanese finance minister Satsuki Katayama that the time for “decisive” action was nearing.
Katayama also advised reporters to hang on to their phones at all times during upcoming holidays.
“Past intervention has had only a temporary effect on the yen if the underlying fundamentals haven’t shifted,” Kristina Clifton, senior currency strategist at Commonwealth Bank of Australia, wrote in a note. “Continued yen depreciation may prompt several rounds of intervention, which in turn would cause larger two-way swings in USD/JPY.”
In the oil market, prices remained elevated following threats by Tehran of “long and painful strikes” on US positions if Washington renewed attacks on Iran, while US president Donald Trump faces a deadline to end the conflict.
The currencies of Japan and other nations dependent on energy imports had been in decline since late February, when US and Israel started aerial bombardment of Iran, leading to the closure of the Strait of Hormuz shipping lane for oil.
Trump is expected to notify Congress that he plans a 30-day extension of the operation or to disregard a 60-day legal deadline on it entirely, with his administration arguing that a current ceasefire with Tehran marked an end to the conflict.
The dollar index slid 1.76% in April after a surge in March that underscored the US economy’s relatively lower exposure to higher oil prices compared with the euro zone and Japan.
The European Central Bank and the Bank of England kept interest rates unchanged on Thursday, as expected, following holds earlier in the week by the Federal Reserve and Bank of Japan. Even so, the ECB and BOJ signaled readiness to hike rates as soon as June to contend with imported energy inflation.
“Combined with the Bank of Japan’s ‘hawkish hold,’ if the market starts to price in a rate hike at the next meeting in June, yen buying could gather momentum,” Sakura Koike, an analyst at Mitsubishi UFJ Bank, said in a note.
In cryptocurrencies, bitcoin fell 0.17% to US$76,330.16, and ether declined 0.27% to US$2,257.53.
