U.S. Dollar Drops Sharply as Japan Intervenes to Support Yen

NEW YORK – The U.S. dollar dropped significantly against the yen and other major currencies on Thursday after Japanese authorities took decisive action to support their currency. Oil prices also retreated from four-year highs as investors continued to weigh the risks of escalating tensions in the Middle East.

In a statement earlier on Thursday, Japanese Finance Minister Satsuki Katayama suggested that the time was nearing for "decisive" intervention in the currency markets, sending strong signals of potential action to stabilize the yen.

Two sources familiar with the matter confirmed to Reuters that Japanese officials had intervened in the foreign exchange market, purchasing yen after the currency hit its weakest level against the dollar since July 2024.

The yen surged by as much as 3% against the dollar, reaching 155.5 yen – marking the largest single-day drop in the U.S. dollar since late December 2024. It was last seen down by 2.33% at 156.52 yen.

"It's pretty obvious given the discussion from the Ministry of Finance about potential intervention," said John Velis, Americas macro strategist at BNY. "It's not really a surprise, plus the fact that the yen had been performing weakly for the last few weeks makes the intervention quite understandable."

Earlier in March, the dollar had gained strength amid safe-haven demand as the U.S.-Israeli conflict with Iran intensified, which highlighted the U.S. economy’s relatively lower exposure to higher oil prices compared to the eurozone and Japan.

The U.S. dollar index (USD) was down 0.80% at 98.06, on track to end a two-day streak of gains.

Central Bank Decisions

In Europe, the European Central Bank (ECB) held interest rates steady, as expected. However, ECB officials extensively discussed the possibility of a rate hike in an effort to combat soaring inflation, which had surged to 3% in April, well above the ECB's target of 2%.

The euro gained 0.51% against the dollar, reaching $1.173325.

Meanwhile, the Bank of England also decided to keep interest rates unchanged while outlining scenarios on how the ongoing conflict in Iran could impact the economy. The British pound strengthened 0.98%, reaching $1.36075.

Efforts to resolve the conflict between the U.S. and Iran have stalled, as the U.S. tries to push a naval blockade aimed at halting Iran's vital oil exports. U.S. President Donald Trump was scheduled to receive a briefing on Thursday regarding plans for additional military strikes on Iran.

Oil Prices Retreat

In energy markets, Brent crude prices fell 3.41%, settling at $114.01 per barrel after rising for eight consecutive sessions.

The Federal Reserve, meeting on Wednesday, also chose to leave interest rates unchanged. However, there was some division among policymakers, with one member dissenting in favor of a rate cut, and three others expressing concerns that the Fed's policy statement should no longer imply a bias toward easing monetary policy.

As a result, the U.S. dollar weakened by 1.28% against the Swiss franc, which traded at 0.78110.

Chart: Japanese Yen Surge Following Government Intervention

Visual: Japanese Yen jumps 3% after government steps into market

-Reporting by Chibuike Oguh in New York; Editing by Chris Reese, Paul Simao, and Edmund Klamann/Reuters