Dollar May Record Significant Weekly Decline Against Yen Following Japan's Intervention

Dollar Heads for Biggest Weekly Loss Against Yen Since February

The dollar was on track for its biggest weekly loss against the yen since February on Friday after Japan intervened to support its currency. Markets remained on edge as Japan's top currency diplomat, Atsushi Mimura, underscored authorities' unease over rapid yen moves.

According to data released by the Bank of Japan, authorities may have spent up to 5.48 trillion yen during the operation, just below the 5.48 trillion yen deployed in July 2024. This suggests that Japan likely spent up to $35 billion to support the yen. The dollar briefly slid from around 157.1 to 155.49 against the yen before recouping some losses after Mimura's remarks. It was last up 0.26% to 157.04.

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Central banks held rates steady this week. The European Central Bank and the Bank of England held interest rates steady on Thursday, in line with expectations, following earlier pauses by the Federal Reserve and the Bank of Japan. However, both the ECB and BOJ signaled they could begin raising rates as soon as June to curb inflationary pressure stemming from higher imported energy costs.

The euro was flat at $1.1721, heading for a second consecutive weekly gain. Sterling was last down 0.16% at $1.135803 and poised to snap four straight weeks of advances. The dollar was last down 0.03% to 0.78150 against the Swiss franc and was set for its second week of losses.

Historically, the effects of intervention tend to fade without accompanying policy shifts, rate hikes, or coordination. Analysts speculate that officials could step in to support the yen again during Japan's Golden Week holiday next week.