Key insights
- The dollar weakened against the yen following warnings from Japanese officials about potential intervention. The article suggests the market is pricing in the possibility of BOJ intervention, especially during upcoming holidays. While intervention could cap USD/JPY, U.S. Treasury involvement remains a wildcard. Higher oil prices and geopolitical risks are also influencing currency movements, with safe-haven demand impacting the dollar.
By Stefano Rebaudo
April 30 (Reuters) - The dollar fell sharply against the yen and eased versus the euro on Thursday as oil prices dropped after rising earlier in the session and officials sent firm signals about possible intervention to support the Japanese currency.
Japanese Finance Minister Satsuki Katayama said just before 0800 GMT the time to take "decisive" action in the market was nearing.
The dollar/yen was down 0.45% at 159.45 after Katayama's remarks, then fell sharply in a matter of minutes after 1030 GMT from 159.50 to 157.8.
It was last down 2% at 157. It had hit 160.72 earlier in the session, its highest level since July 2024.
"We cannot fully exclude the BoJ is intervening, but this looks more like an exacerbated reaction to the final warning by Mimura earlier this morning," ING forex strategist Francesco Pesole said.
"There has been some speculation the BoJ may intervene during a holiday period. Some European markets are closed tomorrow and UK markets are closed on Monday, so perhaps some market participants are closing short-yen/dollar positions ahead of that,” he added.
Analysts flagged that intervention could prevent the dollar/yen from rising above the 162/165 range. The wild card, however, would be whether the U.S. Treasury got involved.
Safe-haven demand lifted the dollar in March after the Iran war broke out, underscored by the U.S. economy’s relatively lower exposure to higher oil prices compared with the euro zone and Japan. Investors are weighing higher oil prices, which tend to pressure the yen, against fears that Japanese authorities could step in to support the currency around the 160 level.
The dollar index was down 0.59% at 98.33 after hitting 99.092, its highest level since April 13.
EURO TRACKS OIL PRICES
The euro rose 0.36% to $1.1716 as oil prices fell.
"Concern that the current ceasefire could be followed by renewed conflict and further pressure on global oil supplies can be a trigger for the dollar to make a move higher," said Kit Juckes, macro strategist at SGCIB, recalling that the single currency fell to around 1.14 at the start of the conflict.
Efforts to resolve the conflict have hit an impasse, which the United States is trying to unlock with a naval blockade of Iran's oil exports, Tehran's economic lifeline.
Analysts have argued that a potential nuclear deal was the main sticking point for a peace deal in the Middle East, as any agreement that leaves Iran's nuclear programme largely unchanged could be politically damaging for the U.S. president at home.
With talks stalled, U.S. President Donald Trump is slated to receive a briefing on Thursday on plans for a series of fresh military strikes on Iran, according to an Axios report late on Wednesday.
HAWKISH TILT FROM THE FED
U.S. Federal Reserve Chair Jerome Powell closed out his eight years in office with rates on hold amid rising inflation concerns. The Fed's 8–4 decision to leave rates unchanged was its most divided since 1992, drawing three dissents from officials who no longer think the bank should communicate a bias toward easing.
Trump expects Kevin Warsh, his pick to succeed Powell on May 15, to deliver rate cuts. Warsh has said he did not promise Trump he would do so.
"Now would be a good time to cut interest rates and Warsh should convince his colleagues on the FOMC to take such action," Michael Pfister, forex strategist at Commerzbank, said.
"Yesterday’s dissenters show that this will not be easy, if he even wants to," he added, mentioning the removal of the easing bias.
(Reporting by Stefano Rebaudo; Editing by Shri Navaratnam, Thomas Derpinghaus, Sharon Singleton and Andrew Heavens)