The Japanese yen rose on Wednesday amid speculation of fresh intervention by the authorities, but lost momentum on Thursday due to diverging views on the Bank of Japan's and the Federal Reserve's credit policies.
The pair's last active move came after the conclusion of the Fed's monetary policy meeting. Jerome Powell confirmed that the US central bank is leaning towards lowering interest rates this year, even if the timing will be delayed due to persistent inflation, Reuters reported. This information led to a decline in the dollar.
Daisaku Ueno, Chief FX Strategist at Mitsubishi UFJ Morgan Stanley Securities, pointed out that the yen was pulling back from a more than two-week high reached the previous day in response to a possible intervention by Japanese authorities for the second time this week.
"There is no doubt that the Ministry of Finance will intervene," he stressed.
Also, he added that the Bank of Japan's actions showed that it considers the level of 160 yen per dollar "the last line of defense".
At the same time, the generally positive sentiment in the equity markets following the Fed chief's speech put pressure on the safe-haven yen.
At the time of writing, the USD/JPY was up 0.58% at 155.36.
In addition, long-term government bond yields are at 376 basis points, which is also weighing on the Japanese currency.
The EUR/JPY and GBP/JPY pairs were up 0.65% and 0.51% to 166.61 and 194.65, respectively.
AUD/JPY and NZD/JPY jumped 0.87% and 0.21% to 101.67 and 0.5940 respectively on positive market sentiment.
Although the yen rose early in the May 2 trading session on further intervention by the Japanese authorities, it later declined after Bank of Japan (BoJ) board members' views on the outlook for monetary policy were released.
Some members indicated that long-term interest rates should be primarily determined by market forces, while others suggested that the BoJ should consider reducing purchases and reducing bond holdings.
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