Japanese Yen drops to two-week low vs USD as bears shrug off intervention fears

• USD/JPY trades with a positive bias for the fifth straight day amid a sustained USD buying interest.
• The incoming US macro data lifts bets for a rate hike by the Fed in 2026 and underpins the buck.
• Geopolitical uncertainties and the US-China optimism also benefit the USD and support the pair.

The USD/JPY pair touches a two-week high during the Asian session on Friday and looks to extend the weekly uptrend amid a broadly firmer US Dollar (USD). Spot prices remain on track to register strong weekly gains and currently trade just below the 158.50 level, up slightly for the fifth consecutive day.

Traders ramped up their bets for an interest rate hike by the US Federal Reserve (Fed) in 2026 following the release of hotter-than-expected US inflation figures earlier this week. Adding to this, US Retail Sales expanded for the third straight month in April, reflecting a robust consumer spending and reaffirming hawkish Fed expectations. This, along with persistent geopolitical uncertainties, lifts the USD to a fresh monthly peak and acts as a tailwind for the USD/JPY pair.

Peace talks between the US and Iran remain in limbo amid broader disagreements over Tehran's nuclear program and the Strait of Hormuz. Moreover, US-China relations have stabilized following a high-level summit between President Donald Trump and President Xi Jinping. The International Monetary Fund (IMF) formally welcomed the constructive dialogue, noting that lowering trade tensions and reducing economic uncertainty are highly beneficial for global financial stability.

Meanwhile, data released earlier today showed that Japan's wholesale inflation—Producer Price Index (PPI) —surged 4.9% year-over-year in April amid rising oil and import costs due to the ongoing conflict in the Middle East. This adds to worries about economic risks stemming from the Iran tensions and weighs on the Japanese Yen (JPY), further lending support to the USD/JPY pair. However, speculations that authorities will step in to prop up the JPY cap the upside for the currency pair.