At the same time, the Japanese yen staged a sharp rally, climbing as much as 1.8% in a sudden move that pushed the dollar down to around 155 yen—its weakest level since February 24. The rapid appreciation sparked renewed speculation that Japanese authorities may have stepped in to support the currency amid ongoing volatility.
The yen’s surge came as traders watched closely for signs of official action from Tokyo, with market participants increasingly alert to intervention risks following recent warnings from policymakers.
Japanese Finance Minister Satsuki Katayama reiterated the government’s stance against disorderly currency moves, saying: “As I have said repeatedly, we will take decisive measures against speculative moves, in accordance with the statement signed between Japan and the United States last year.” Her comments followed a recent meeting at the Asian Development Bank annual gathering in Uzbekistan.
Japan’s Ministry of Finance did not immediately comment, as the country observed a public holiday.
Markets on edge over possible FX intervention
Traders said the abrupt yen strengthening added to expectations that Tokyo could be actively defending the currency. However, analysts noted that broader global factors continue to complicate Japan’s efforts to stabilize the yen.
Jeremy Stretch, head of G10 FX strategy at CIBC Capital Markets, pointed to structural pressures in global markets. He noted: “It’s very tough to get the yen down if oil is going to remain elevated and/or U.S. Treasury yields are… nearer 4.4% than 4.2%.” He added that the yen’s recovery despite these conditions still reflects “some degree of success” for Japanese authorities.
Persistent strength in U.S. bond yields and elevated oil prices continue to support the dollar, making sustained yen stabilization more difficult for policymakers.
Iran diplomacy drives broader dollar weakness
Elsewhere, the dollar lost ground broadly after comments from U.S. President Donald Trump suggesting a temporary pause in naval escort operations through the Strait of Hormuz, citing progress toward a “comprehensive agreement” with Iran.
The move followed remarks from U.S. Secretary of State Marco Rubio, who said the United States had already achieved its objectives in recent military actions involving Iran.
Oil markets reacted quickly, with Brent crude falling more than 2.5% to around $106 per barrel as geopolitical risk premiums eased.
Other currencies strengthen as risk sentiment improves
Weaker dollar sentiment lifted several major currencies. The euro rose 0.4% to $1.1735, while the British pound gained 0.4% to $1.3598.
The Australian dollar outperformed, climbing 0.8% to trade near $0.724—its highest level in four years—following the Reserve Bank of Australia’s decision to raise interest rates for a third time this year.
Focus shifts to U.S. labor data
Attention now turns to upcoming U.S. non-farm payrolls data, which investors will use to gauge whether the American economy remains strong enough to keep the Federal Reserve on hold, or whether signs of labor market cooling could reopen expectations for interest rate cuts.
For now, currency markets remain caught between shifting geopolitical headlines, central bank policy expectations, and heightened sensitivity to any signal of intervention in Japan.