Japan yen nears intervention zone; dollar steady as traders watch Iran

LONDON - The yen slid to its weakest against the U.S. dollar since late April on Wednesday, skimming levels that triggered official Japanese intervention last month, as cautious traders weighed up the risks of a renewed flare-up in the Iran war.

The New Zealand dollar was one of the strongest performers of the day, jumping after the Reserve Bank came unexpectedly close to raising interest rates and flagged that they would most likely need to increase sooner and by more than envisaged previously.

The safe-haven U.S. dollar was steady after edging higher against other major currencies a day earlier, as U.S. strikes on Iran dented optimism for a near-term end to hostilities and a reopening of the crucial Strait of Hormuz shipping channel.

U.S. Secretary of State Marco Rubio said that negotiating a deal to halt the conflict could "take a few days."

The yen was steady at 159.45 per dollar on Wednesday, its weakest since April 30, when Japanese authorities stepped into the market to buy the currency. The 160 level is viewed by many traders as a threshold that could trigger intervention, as it proved to be last month, when the yen crossed that point.

"The market's obviously leaning optimistically towards a deal (on Iran), and that definitely has had an impact this week ... to weaken the dollar and to bring down bond yields," MUFG currency strategist Lee Hardman said.

"The surprising aspect is the yen is continuing to remain weak. You would have thought if energy prices come down, U.S. yields come down, that could help to bring down dollar/yen. But so far, that's not the case."

Bank of Japan Governor Kazuo Ueda struck a somewhat hawkish posture on Wednesday, saying the war-driven oil shock could become persistent in an environment of high inflation expectations and rising wages.

Markets currently attach a 70% chance for a quarter-point hike at the BOJ's next policy meeting on June 15 to 16, according to LSEG data.

The dollar index, which tracks the performance of the U.S. currency against the yen and five other units, was little changed at 99.08, having risen 0.15% the day before.

The euro edged up to $1.1644, while the pound was steady at $1.3446.

The New Zealand dollar rallied 0.6% to $0.587, regaining the ground it lost with a 0.6% drop on Tuesday.

The RBNZ kept the overnight call rate (OCR) steady in a split decision, with three members voting to raise rates by a quarter-point and three voting to stand pat. Governor Anna Breman had the ultimate deciding vote.

"On balance, the OCR will most likely need to increase sooner and by more than envisaged in the February Monetary Policy Statement," the RBNZ said in its statement.

"The governor appears keen to wait until the RBNZ sees the 'whites in the eyes' of core inflation before responding," said Westpac New Zealand chief economist Kelly Eckhold.

"The jury remains out on whether the first OCR rise will be in July versus September."

The Australian dollar slipped 0.4% to $0.714, reversing an earlier gain, after data showed the annual inflation rate cooled to 4.2% in April, compared with 4.6% in March and analysts' forecasts of 4.4%.

That followed a soft reading for jobs last week, and traders are now pricing only 20 basis points of rate hikes for the remainder of the year.

(Additional reporting by Kevin Buckland in Tokyo; Editing by Sonali Paul, Stephen Coates and Gus Trompiz)

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This story was originally published May 27, 2026 at 5:02 AM.