US Dollar Declines Against Japanese Yen Following Reports of Central Bank Intervention

US Dollar Plummets Against Yen Amid Japanese Intervention

The US dollar experienced a sharp decline against the yen on Thursday, following reports that Japanese authorities had intervened in foreign exchange markets to support their currency. This move led to a significant drop in the dollar's value against the yen, with the currency falling by as much as 3% to 155.5 yen. This represents the largest single-day drop since late December 2024.

According to sources familiar with the matter, Japanese officials had intervened to buy the yen, after it hit its weakest point against the dollar since July 2024. The dollar's decline was further exacerbated by the fact that it had been lifted by safe-haven demand in March, following the outbreak of the US-Israeli war on Iran. This highlighted the relatively lower exposure of the US economy to higher oil prices compared to the euro zone and Japan.

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The dollar index, which measures the value of the dollar against a basket of other major currencies, was down 0.70% at 98.17, putting it on track to snap two consecutive sessions of gains. The European Central Bank (ECB) left interest rates unchanged as expected, but extensively debated a hike to combat soaring inflation, which jumped 3% in April, above the ECB's 2% target. The euro rose 0.43% to $1.1726 as a result.

Meanwhile, the Bank of England kept interest rates on hold and set out scenarios for the economic impact of the Iran war. The pound sterling strengthened 0.79% to $1.3579. Efforts to resolve the conflict have stalled, with the United States attempting to unlock a resolution with a naval blockade of Iran's oil exports, which is the country's economic lifeline.

The conflict has had a significant impact on oil prices, with Brent crude falling 2.9% to $114.25 per barrel after rising for eight consecutive sessions. The US Federal Reserve also left interest rates unchanged in an 8-4 decision on Wednesday, its most divided since 1992, drawing three dissents from officials who no longer think the bank should communicate a bias toward easing. The dollar weakened 1.19% to 0.782 against the Swiss franc.