Dollar weakens against yen as Japan reportedly intervenes after nearly two years

The U.S. dollar fell on Thursday, with its weakening against the Japanese yen in particular grabbing the spotlight after a report that the Asian nation had intervened in a bid to prop up its currency.

At 17:33 ET (21:33 GMT), the U.S. dollar index, which tracks the greenback against a basket of six major peers, was down 0.9% to 98.06.

Japan said to intervene

The Japanese yen strengthened to its highest level since July 2024 against the dollar, with the USD/JPY pair sliding 2.3% to $156.57. 

Nikkei on Thursday reported that the Japanese government and the Bank of Japan had carried out a currency intervention on April 30 by buying yen and selling dollars.

The report comes after Japanese finance minister Satsuki Katayama earlier in the day signaled that the timing for "decisive" action in the market was nearing.

Authorities in Japan have indicated that they may step in to offer support to the yen at around the key level of 160. 

"Any intervention-led, temporary JPY strength may be seen as an opportunity for yen-selling hedges," analysts at BofA Securities said in a note.

Fed holds rates steady, Powell to stay on as governor

Foreign exchange market participants were also digesting the Federal Reserve’s latest interest rate decision and commentary from Wednesday.

The Fed held its key policy rate steady, as widely expected. Chair Jerome Powell said the economic outlook remained highly uncertain and that the Middle East conflict had contributed to that uncertainty.

"In the near term, higher energy prices will push up overall inflation. Beyond that, the scope and duration of potential effects on the economy remain unclear, as does the future course of the conflict itself. We will continue to monitor the risks to both sides of our dual mandate," Powell said.

The Fed chair added that the Federal Open Market Committee (FOMC) felt like it was in a "good place" to either move towards rate cuts or rate hikes depending upon how the impact from surging oil prices plays out.

More so than the Fed decision and Powell’s commentary, traders were focused on whether or not the central bank chief would stay on as a governor. The highest number of dissents since 1992 to the Fed’s move also hinted at differing viewpoints among policymakers. Powell is expected to be replaced by President Donald Trump’s pick, Kevin Warsh.

"The Fed inching closer to a more balanced description of the policy outlook reinforces our baseline view that the policy rate is likely to stay unchanged this year. As we outlined in our recent outlook update, we see the Fed on hold near neutral indefinitely. While a rate hike is not a trivial probability, we continue to assess lower policy rates as more likely than higher over the course of this year," Deutsche Bank analysts led by Matthew Luzzetti said on Wednesday.