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Yen jumps after Japan intervenes, dragging down USDJPY
Japan kept its overnight rate at 1% and lifted its 2026 GDP outlook to 0.6% after intervention helped spur the yen’s sharp two-year biggest drop in USDJPY.
The yen strengthened sharply after Japan intervened in foreign exchange markets, helping push USDJPY to its steepest decline in two years, according to Action Forex. The move came as investors reassessed expectations for the US Federal Reserve’s ability to return inflation to target, contributing to the US dollar’s worst two-day performance since January. Action Forex said a combination of falling US Treasury yields and weaker safe-haven demand also weighed on the greenback, with oil prices stabilizing and US stock market indices rising. The outlet also pointed to shifting rate expectations after the July FOMC meeting and concerns that the Fed may not tighten in September.
Beyond the dollar, Action Forex highlighted support for competing currencies. It noted that eurozone activity grew faster than US GDP in April-June for the first time since Q4 2025, raising the odds of an ECB rate rise, while the Bank of England kept borrowing costs unchanged but signaled it could be forced to tighten if Middle East conflict continues.
In Japan, the government leveraged the currency intervention to avoid a rush by the Bank of Japan, Action Forex reported. The BoJ held the overnight rate at 1% and raised its 2026 GDP forecast to 0.6% from 0.5%, while lowering the expected inflation rate to 2.5% from 2.8%.