Summary: The Japanese yen retreated marginally on Friday but was still set for a sizeable weekly advance after officials in Tokyo moved to buy the currency when it neared two-year lows. Traders said the intervention produced a sharp move in the dollar-yen rate during London trading hours, and comments from Japanese officials have kept investors alert to the possibility of further action, even as markets thin for holidays.
The yen eased 0.25% against the dollar to 156.99 per dollar on Friday, reversing some of the sharp gains it logged on Thursday. That earlier surge has left the Japanese currency on course for a 1.8% weekly rise, its strongest weekly performance since mid-February. The dollar index - which tracks the U.S. dollar against a basket of other currencies - was largely unchanged at 98.14, while the euro edged down 0.03% to $1.1727.
Two sources familiar with the matter told Reuters that Japanese authorities had intervened to buy the yen after it hit its weakest level against the dollar since July 2024. The abrupt jolt in the dollar-yen exchange rate occurred in London trading hours and followed earlier remarks from 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.
Market participants said the intervention restored some immediate yen buying, but analysts cautioned the measure may not be sufficient to reverse broader forces behind the currency's weakness. "The difficulty is they are sort of fighting against some underlying fundamentals there," said Ken Crompton, the head of rates strategy at National Australia Bank. "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.
Kristina Clifton, senior currency strategist at Commonwealth Bank of Australia, wrote in a note that past intervention had only delivered temporary relief when underlying fundamentals remained unchanged. "Continued yen depreciation may prompt several rounds of intervention, which in turn would cause larger two-way swings in USD/JPY," she said.
Adding to the environment of heightened sensitivity, Tokyo and other markets were operating with thinner liquidity because of May 1 holidays, and Tokyo is due to enter a three-day shutdown next week. That reduced participation can amplify moves when interventions occur or when market news arrives.
Market and policy context
Oil prices remained elevated amid threats from Tehran of "long and painful strikes" on U.S. positions if Washington renewed attacks on Iran. Those tensions, together with the closure of the Strait of Hormuz earlier in the period after aerial bombardment activity involving the U.S. and Israel, have contributed to declines in the currencies of Japan and other nations that are heavy energy importers since late February.
U.S. President Donald Trump faces a deadline to end the conflict; his administration is expected to notify Congress that he plans a 30-day extension of the operation or to disregard a 60-day legal deadline, arguing that a current ceasefire with Tehran marks the end of the conflict. These developments have fed into the relative performance of key currencies and the dollar's trajectory.
The dollar index fell 1.76% in April after a sharp rise in March, a pattern that reflected differing exposures to higher oil prices across major economies. On the central bank front, the European Central Bank and the Bank of England both left interest rates unchanged on Thursday as expected, following earlier holds by the Federal Reserve and the Bank of Japan. Nevertheless, both the ECB and the BOJ signaled a readiness to raise rates as soon as June to counter imported energy-driven inflationary pressures.
Sakura Koike, an analyst at Mitsubishi UFJ Bank, noted that these dynamics could influence currency flows. "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," she wrote in a note.
Other markets
In cryptocurrencies, bitcoin eased 0.17% to $76,330.16, while ether slipped 0.27% to $2,257.53. These moves occurred amid broader currency and geopolitical developments that have shaped risk sentiment and commodity prices.
Outlook
Investors are likely to remain vigilant for signs of further intervention from Japan's Ministry of Finance, especially with liquidity thin during holiday periods. Analysts caution that unless the forces weakening the yen change materially, any official action could produce only transient relief and may invite repeated steps that increase short-term volatility in USD/JPY. At the same time, evolving tensions in the Middle East and central bank communications about the timing of rate moves will continue to influence currency and commodity markets.