Forex Today: Japanese Yen retreats after rallying on suspected intervention, BoJ holds steady
Here is what you need to know on Friday, July 31:
The Japanese Yen (JPY) loses some strength early Friday after rallying in the American session on Thursday, possibly fuelled by a foreign exchange market intervention by Japanese authorities. Later in the session, preliminary July Harmonized Index of Consumer Prices (HICP) data from the Eurozone will be feature in the economic calendar. In the second half of the day, the University of Michigan (UoM) will publish its revision to the July Consumer Sentiment Index data.
Japanese Yen Price This week
The table below shows the percentage change of Japanese Yen (JPY) against listed major currencies this week. Japanese Yen was the strongest against the US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -1.03% | -0.85% | -2.05% | -0.48% | -0.44% | -1.19% | -1.09% | |
| EUR | 1.03% | 0.17% | -1.05% | 0.56% | 0.60% | -0.16% | -0.07% | |
| GBP | 0.85% | -0.17% | -1.34% | 0.39% | 0.43% | -0.33% | -0.22% | |
| JPY | 2.05% | 1.05% | 1.34% | 1.62% | 1.66% | 0.89% | 0.91% | |
| CAD | 0.48% | -0.56% | -0.39% | -1.62% | 0.02% | -0.71% | -0.61% | |
| AUD | 0.44% | -0.60% | -0.43% | -1.66% | -0.02% | -0.76% | -0.66% | |
| NZD | 1.19% | 0.16% | 0.33% | -0.89% | 0.71% | 0.76% | 0.10% | |
| CHF | 1.09% | 0.07% | 0.22% | -0.91% | 0.61% | 0.66% | -0.10% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Japanese Yen from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent JPY (base)/USD (quote).
USD/JPY turned south during the American trading hours on Thursday and plunged to its lowest level since mid-May below 158.00, losing about 3% in less than an hour. The intensity of the decline pointed to a potential intervention in the currency market but there was no official confirmation. Although USD/JPY recovered a small portion of its losses toward the end of the day, it still closed with a dialy loss of nearly 2.5%. Reflecting the broad JPY strength, EUR/JPY fell 1.9% on the day and GBP/JPY lost about 1.7%.
Meanwhile, the Bank of Japan (BoJ) announced that it left its monetary policy settings unchanged following the July meeting. In its policy statement, the BoJ noted that significant downside risks to economic activity and significant upside risks to prices have decreased but acknowledged that there is still a risk of underlying Consumer Price Index (CPI) inflation deviating upward to a level above the price stability target of 2%. BoJ Governor Kazuo Ueda reiterated in the post-meeting press conference that the year-on-year rate of increase in CPI likely to accelerate to level "clearly above" 2% from second half of FY 2026. Regarding the policy outlook, Ueda said that they expect to keep raising rates and adjusting degree of easing in response to the economy, prices and financial conditions.
Yen volatility intensifies as BoJ tweaks forecasts and Dollar stumbles
Analysts at Deutsche Bank highlight that, according to the Nikkei, “Japan’s government and the BoJ had intervened in the FX market and that the US also carried out a rate check on the yen,” underscoring the authorities’ growing discomfort with recent Yen moves. They note that “while the yen spiked, the Dollar fell against all G10 currencies yesterday in what was the worst day for the Dollar index (-1.01% after -0.52% on Wednesday) since the post-Liberation Day sell off in April 2025,” marking a sharp setback for the greenback.
On the policy front, Deutsche Bank point out that the “BoJ’s board raised its median GDP growth forecasts for both the current and next fiscal years, and now expects the economy to expand by 0.6% this fiscal year,” even as the central bank simultaneously “lowered its core inflation forecast to 2.5% from 2.8%, attributing the downward revision primarily to the impact of government subsidy programs.”
The US Dollar (USD) Index extended its slide on Thursday and dropped to its lowest level since mid-June. Early Friday, the USD Index stays in positive territory above 100.00. The data from the US showed on Thursday that the Gross Domestic Product (GDP) expanded at an annual rate of 1.5%, missing the market expectation of 2.1% by a wide margin. Additionally, the core Personal Consumption Expenditures (PCE) Price Index, rose 3.3% on a yearly basis in June, compared to 3.4% in May.
The Bank of England (BoE) announced on Thursday that it maintained the bank rate at 3.75% after the July meeting, as anticipated. Three members of the Monetary Policy Committee (MPC) voted for a 25 basis points rate increase against six MPC members that preferred the policy hold. Although GBP/USD's initial reaction was muted, the pair gathered bullish momentum on broad USD weakness and rose more than 0.7% on the day.
Bailey flags tentative second-round risks, keeps GBP anchored to data
FXS Speechtracker showed BoE Governor Andrew Bailey’s tone was modestly above the historic average (6.2 vs 5.6), signalling a slightly more cautious and data-dependent stance. The emphasis on subdued UK activity, a soft labour market, weak demand limiting pass-through, and spare capacity curbing wage gains leans dovish, but the warning that persistent Mideast conflict plus second-round effects could still require rate hikes injects a conditional hawkish bias.
By stressing that the assessment of second-round effects is tentative, that indirect inflation effects could add 0.5 percentage points in H2-2026, and that household expectations remain elevated, Bailey keeps GBP sensitive to upside inflation surprises. The remark that the UK rate curve is in a “reasonable position” and consistent with the BoE’s reading, while risk premia dominate current pricing and the central scenario carries unusually low probability, supports a balanced, wait-and-see stance that limits immediate repricing but leaves GBP vulnerable to renewed rate-hike speculation if geopolitical shocks intensify.
EUR/USD registered strong gains for the second consecutive day on Thursday before entering a consolidation phase above 1.1500 in the European session on Friday.
Gold (XAU/USD) extended its rebound on Thursday and closed the day slightly above $4,100, rising about 1% on the day. Early Friday, XAU/USD remains under pressure and trades below $4,070.
Oil volatility contained as US and Iran avoid wider escalation
Analysts at Deutsche Bank observe that, against the broader geopolitical backdrop, “the continued volatility in oil markets was modest by comparison.” They note that “shipping through the strait has been disrupted but it hasn’t completely stopped,” adding that the US and Iran “currently look to be avoiding a move from low-level escalation to all-out war,” which has helped limit the scale of the market reaction.
At the time of press, the barrel of West Texas Intermediate was trading slightly below $81, losing about 2.3% on the day.
Japanese Yen FAQs
The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.
One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The BoJ ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to an increasing policy divergence between the Bank of Japan and other main central banks. More recently, the gradually unwinding of this ultra-loose policy has given some support to the Yen.
Over the last decade, the BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supported a widening of the differential between the 10-year US and Japanese bonds, which favored the US Dollar against the Japanese Yen. The BoJ decision in 2024 to gradually abandon the ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing this differential.
The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.
