The US dollar briefly fell against the yen on Thursday (Apr 25) after data showed that the world’s largest economy grew more slowly than expected in the first quarter.

Gross domestic product (GDP) increased at a 1.6 per cent annualised rate in the last quarter, according to advance estimates from the Commerce Department’s Bureau of Economic Analysis. Economists polled by Reuters had forecast GDP rising at a 2.4 per cent rate.

The dollar fell as low as 155.31 yen after the data, but recovered and was last up 0.2 per cent at 155.67 yen.

Some market participants see the 155 level as a line in the sand that will prompt Tokyo authorities to take action.

The Japanese authorities “are between a rock and a hard place”, said Athanasios Vamvakidis, global head of G10 forex strategy at the Bank of America. “If they don’t step in, the breach of the 155 level can attract speculative flows as markets expect intervention.”

“If they buy yen, pressures can still arise because many investors are waiting for intervention to sell the Japanese currency,” he added, arguing that the yen could reach 160 even if there is intervention.

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Bank of Japan (BOJ) governor Kazuo Ueda is expected to be mindful of an episode in 2022, when his predecessor’s dovish remarks triggered a yen plunge that forced Tokyo to intervene to prop up the currency.

However, the prospect of Japanese rates staying low for an extended period and expectations for a delayed start to US rate cuts have continued to push down the yen.

Analysts expect the BOJ meeting that began on Thursday to deliver a marginally hawkish outcome, with the central bank possibly just announcing a modest decline in its bond-buying plans.

The dollar nursed some losses versus other currencies, however, after a slight tumble earlier in the week when upbeat business activity data in the eurozone and the United Kingdom lifted the euro and sterling.

The euro was last up 0.25 per cent at US$1.0724, edging away from an over one-week-high hit on Wednesday, while the sterling rose 0.4 per cent to US$1.2511.

German consumer sentiment is set to rise in May on the back of households’ brighter income expectations, a survey showed.

The dollar dipped 0.2 per cent to 105.59 against a basket of currencies, though it pulled away from a nearly two-week-low hit in the previous session. REUTERS