Asian Intervention Sinks Dollar, Bolsters Aussie and Kiwi

The US dollar faced increased pressure due to suspected intervention from Asian foreign exchange authorities, softer-than-expected US economic data, and a surge in risk appetite following strong earnings updates from Microsoft and Amazon. The Australian and New Zealand dollars broke to fresh highs as the US dollar weakened.

Japanese authorities likely intervened in coordination with South Korean authorities and possibly with tacit support from the United States. This move came after the Fed opted against raising rates, creating an ideal backdrop for the intervention to have a significant impact.

The Bank of Japan's policy decision later in the session is expected to be influenced by the recent intervention episode. There is a marginal increased risk that the Bank of Japan may raise rates pre-emptively rather than later in the year, as US Treasury Secretary Scott Bessent has urged normalizing policy. However, this could lead to a sharply lower USD/JPY and potentially broader US dollar weakness.