In holiday-thinned markets, the dollar is mostly softer as North American leadership is awaited. In light of yesterday’s surge in the yen, and contrary to our expectation, it does appear that Japanese officials materially intervened yesterday. The intervention may have been for around $34.5 bln (~JPY5.4 trillion), which if accurate, would be larger than the average size of the intervention operations in 2024. Better confirmation will likely be available at the end of next week.
Five G10 central banks met this week. The derivatives market adjusted expectations for this year’s course by 22 bp for the Bank of Canada. Two hikes are now fully discounted. There was a 19 bp increase in the implied year-end target rate for the European Central Bank, where three hikes are now fully discounted. The Bank of England’s hawkish hold saw the expected year-end base rate rise 15 bp to 4.42%, implying two hikes and about 75% chance of a third. The Federal Reserve remains the only major central bank expected to cut rates, but the futures market has a little more than a basis point discounted, down from nearly a dozen basis points at the end of last week.
Prices
G10
• It appeared that the dramatic rally in the yen weighed on the dollar broadly yesterday. The euro bottomed before the yen did. It already recovering from around $1.1655, a marginally new three-week low, when Japanese officials triggered a dramatic short squeeze of the yen. The euro traded higher throughout the North American morning before stalling near $1.1735. It settled above Wednesday’s high (~$1.1720) to record an ostensibly bullish key reversal. In holiday-thinning markets, the euro’s gains were extended to almost $1.1750 today. The week’s high, recorded Monday, was $1.1755. Initial support may be in the $1.1710-20 area now.
• Yesterday’s yen price action will be remembered for a long time. The market had been pushing the dollar higher against the yen. It had already risen above JPY160 before the hawkish hold by the FOMC. The greenback traded slightly above JPY160.70 before Japanese officials threatened intervention in no uncertain terms. Preliminary estimates suggest the intervention may have been for around $34.5 bln, but confirmation is likely at the end of next week. The dollar fell to almost JPY155.55 in early North American activity. It recorded a marginal new low toward around JPY155.50. Since the low was recorded late in the Asia Pacific session, the dollar has not traded above about JPY156.75, though earlier in the session it reached almost JPY157.35. The dollar staged a key downside reversal against the yen. However, the move looks excessive. The greenback did not simply settle below its lower Bollinger Band (two standard deviations from the 20-day moving average) but settled more than three standard deviations lower. The lower Bollinger Band is around JPY157.20 now.
• Sterling recovered strongly after falling to a five-day low (~$1.3455). It reached two-month high above $1.3600 in the North American afternoon. That area had capped sterling earlier this month and corresponds to the (61.8%) retracement of the sell-off from the year’s high in late January near $1.3870. It extended the gains to almost $1.3625 today but is a little better offered in thin European turnover. The next interesting chart area is around $1.3635-50. Initial support is seen in the $1.3570-80 area.
• The Canadian dollar rose by about 0.70% yesterday, its single biggest advance since early March. The greenback settled below CAD1.3600 for the first time since March 11. Limited follow-through selling today took it to CAD1.3570. It is fraying the trendline connecting the January, February, and March lows. A convincing break of that area could signal a test on the March low (~CAD1.3525). The lower Bollinger Band is closer to CAD1.3535.
• After being frustrated at $0.7200, the Australian dollar poked above it yesterday in the risk-on and broadly heavier greenback environment. It made a marginal new high by a few hundredths of a cent today but has come back offered. Initial support is around $0.7170-80. The Aussie held (barely) above $0.7100 on Wednesday, a two-week low. It posted its highest settlement since June 2022. April’s intraday high was slightly above $0.7220.
EM
• After reaching a three-week high against the Mexican peso yesterday (~MXN17.5840), the dollar was sold to about MXN17.46. It edged closer to MXN17.45 today. The dollar had appeared to forge a base earlier this week in the MXN17.34-37 area. The dollar held below BRL5.00 yesterday and fell to almost BRL4.9520. A two-year low was in late April around BRL4.9400. The Colombian central bank kept its key rate steady at 11.25%. The dollar peaked around COP3656 yesterday. It pulled back to settle below COP3640 but still finished higher for first back-to-back sessions since the end of March.
• The dollar was turned down against the offshore yuan after stalling on Wednesday near CNH6.85. It reached CNH6.8480 yesterday before falling to around CNH6.8280. The week’s low was recorded Monday, slightly below CNH6.82. The dollar is trading slightly firmer today. It is hovering near CNH6.8350 in Europe. The mainland market was closed for the national holiday today so there was not a dollar fix. The reference rate was set at CNY6.8628 yesterday and CNY6.8674 last Friday.
• Indian markets were closed today for the national holiday.
Other Markets
• The S&P and Nasdaq jumped to record highs yesterday. The positive equity tone carried over into the Asia Pacific session today, though the holiday means that few participated. Japan, Australia and New Zealand, among the large bourses were open and traded higher. After rising by nearly 1.4% yesterday, Europe’s Stoxx 600 is off fractionally today in light turnover. US index futures are narrowly mixed.
• Asia Pacific benchmark 10-year yields played catch up today after the yesterday’s drop Europe (5-10 bp) and the nearly five basis point decline in the US 10-year yield. Australia and New Zealand yields fell 4.5-5.5 bp. The yield of the 10-year Gilts is almost two basis points higher, and the yield of the 10-year Treasury is a basis point better at 4.38%.
• Through Wednesday’s low, gold has retraced nearly half of its gains from the late March low a little below $4100. It reached almost $4647 yesterday but is trading with a heavier bias today. It found support near $4560. A move above $4700 lifts the technical tone. Silver overshot the 50% retracement but recovered to post its highest close in three sessions. It reached almost $74.60 today before being pressed back slightly below $73. Re-establishing a foothold above $75.00 would be constructive.
• After setting a record high near $111, June WTI reversed lower yesterday and fell to about $103.35. It is consolidating quietly today between about $104 and $106.65.
Data
• After Wednesday’s hawkish hold by the FOMC and yesterday’s Q1 GDP, today and ahead of next Friday’s April employment data, today’s US data may not elicit a strong market reaction. On tap is the final manufacturing PMI, the manufacturing ISM, and April auto sales.
• Canada sees its April manufacturing PMI today. It was above the 50 boom/bust level in Q1 after spending the previous 11 months below it. Last April, it was at 45.3. Employment slipped to 49.8 from 51.0 in February and the forward-looking new orders fell back to December levels.
• The Bank of England stood pat yesterday as widely anticipated and today’s data have been of little consequence. UK mortgage lending and approvals were a little better than expected in March, and the final manufacturing PMI was revised to 53.7 from 53.6 initially and 51.0 in March. The April reading is the strongest since May 2022. The swaps market is discounting around a 60% chance of a hike at the next meeting in mid-June. The odds were near 69% at the end of last week.
• Australia’s Q1 PPI moderated to 0.4% after rising 0.8% in Q4 25. The year-over-year pace eased to 3.0% from 3.5%. Still, on the heels of the firm CPI, the futures market is expecting that the Reserve Bank of Australia will deliver its third hike of the year next week and raise the case rate target to 4.35%. There is about a 75% chance discounted, little changed on the week. The final April manufacturing PMI stands at 51.3 (51.0 preliminary estimate). It averaged 51.0 in Q4 25 and Q1 26. In April 2025, it was at 51.7.
• Japan’s April Tokyo CPI ticked up to 1.5% from 1.4%. It was held back by the subsidy for childcare. The core rate, which excludes fresh food, eased to 1.5% from 1.7%, its slowest pace since March 2022 and its five-month decline is the long decline since 2009. from 1.4%, and the measure that excludes fresh food and energy slipped to 1.9% from 2.3%. Separately, the April manufacturing PMI was revised to 55.1 from the initial estimate of 54.9 (51.6 in March and 48.7 in April 2025).
Reviewed by Marc Chandler
on
May 01, 2026
Rating:
