[MARKET ANALYSIS] USD/JPY rebounds after suffering its largest drop since December 2023 on intervention

DXY: +0.2%

• Regains some composure after weakening yesterday in a continuation of the post-FOMC fallout and following a slew of data, although the main driver was the recent advances in the yen owing to Japanese intervention, and with the US conducting a rate check on the yen, while South Korean FX authorities were said to have conducted rare dollar-selling intervention on Thursday.

EUR/USD: -0.1%

• Holds on to most of the prior day's spoils after reclaiming the 1.1500 handle as the dollar softened, while there was also a slew of recent data from the bloc including better-than-expected GDP.

GBP/USD: Flat

• Takes a breather after returning to the 1.3400 territory and after the currency was largely unfazed by the hawkish BoE vote split and dovish-leaning comments from Governor Bailey.

USD/JPY: +0.6%

• Rebounds overnight and returned to the 160.00 level after suffering its largest intraday drop since December 2023 due to Japan's government and the BoJ intervening, while US authorities conducted rate checks on the yen. Nonetheless, the attention now turns to the BoJ policy decision, with the central bank widely expected to pause following the last meeting's rate hike, although some have suggested that the recent intervention could raise the risk of a surprise today.

Antipodeans: AUD/USD -0.1% / NZD/USD -0.1%

• Traded little changed after gaining yesterday and with little reaction seen to the disappointing Chinese PMI data.

Episodes of this kind, where Japanese authorities step in as USD/JPY approaches psychologically loaded round levels, have followed a recognisable sequence: a sharp initial drop in the pair on suspected or confirmed intervention, followed within sessions by a partial retracement as the fundamental driver of yen weakness, the wide US-Japan rate differential, reasserts itself. Intervention has historically bought time rather than reversed trends unless accompanied by a shift in the policy stance, which is why the co-occurrence with a BoJ decision is the operative detail here; past episodes where intervention was paired with a hawkish surprise have produced more durable yen strength than sterilised action alone. The reported US rate check and South Korean dollar-selling sit within a pattern of occasional Asian FX coordination around periods of broad dollar strength, and such checks have tended to amplify the immediate price signal beyond their mechanical size. Worth watching is the BoJ vote split, forward guidance language, and any follow-through yen buying in subsequent sessions, since repeated intervention at nearby levels has in the past established a soft ceiling that erodes as carry accumulates. The rebound in the pair overnight is consistent with the established retracement pattern rather than evidence the pressure has passed.