07:26 AM EDT, 04/29/2024 (MT Newswires) -- The US dollar fell against most major currencies during early European trade on Monday following a suspected Japanese intervention to support the yen at the opening of an action-packed week for economic data and fundamental risks.

The yen rose sharply against the US dollar from midnight Eastern time after USD/JPY rallied from 158 to 160 in the early hours of the Asia trading session, leading analysts to speculate that Japan's Ministry of Finance had intervened.

"At one point, it fell past the 160 per US dollar mark for the first time since 1990 amid thin liquidity due to a public holiday in Japan. However, the yen has since recovered somewhat, indicating that Japanese authorities may have intervened to support the currency," said Nikesh Sawjani, an economist at Lloyds Commercial Banking.

The suspected intervention pushed USD/JPY briefly back below the 155.0 level while also appearing to pull all other major US dollar pairs lower in tandem. Vice Finance Minister for International Affairs Masato Kanda reportedly declined to comment when asked whether there had been an intervention.

NZD/USD and AUD/USD were the second and third biggest gainers in the G10 grouping on Monday as the antipodean currencies benefited most from the fall in the US dollar, which was accompanied by gains for stock and bond markets across Europe and Asia. Meanwhile, the Swiss franc and Norwegian krone were the fourth and fifth biggest risers while the Swedish krona underperformed after first-quarter GDP and March retail sales were reported to have contracted.

"This week is pivotal with two major events; the Fed's interest rate decision on May 1, and new employment data for April on Friday. Fed Chair Powell must acknowledge the complicated nature of the current inflation environment," said Dana Malas, a data scientist and junior strategist at SEB in Sweden.

Monday's soft opening for the US dollar comes at the start of an action-packed calendar with Wednesday's Federal Reserve monetary policy statement and press conference the highlight for the greenback. The market focus will be on how recent data has impacted the FOMC's judgment and whether it will be appropriate to cut interest rates this year.

While US GDP growth came in weaker-than-expected for the opening quarter and S&P Global PMI surveys further suggested a moderating pace of growth in April, upward revisions to earlier PCE Price Index readings indicated that inflation has been more resilient than previously thought, creating uncertainty about the timing of widely expected interest rate cuts.

"Before the media blackout, virtually all key Fed officials have signaled patience before easing and a couple have even floated the possibility of rate hikes. As such, the bar for a hawkish surprise is high," said Win Thin, global head of markets strategy at Brown Brothers Harriman.

With the Fed aside, markets will likely pay close attention to Tuesday's release of the Employment Cost Index for the opening quarter and Wednesday's ADP Employment report. Institute for Supply Management PMI surveys of the manufacturing and services sectors are also likely to be scrutinized closely after the S&P Global PMI polls fell markedly in April.

However, the economic data highlight of the week ahead is Friday's non-farm payrolls report and average hourly earnings data for April, given how the Fed believes that labor market tightness and pay growth can influence inflation. The consensus is for payrolls to have risen 243,000 this month with average hourly earnings rising a steady 0.3% in month-on-month terms.

"A softer NFP print could significantly weigh on the USD given still-extended sentiment and positioning," Barclays strategists said in a Sunday note to clients. "In all, we remain patient and look for more opportune levels and appropriate catalysts before we re-engage into fresh dollar longs."