04:38 AM EDT, 05/02/2024 (MT Newswires) -- The Japanese yen (USD/JPY) rallied to two-week highs overnight and remained buoyant in early European trade on Thursday following further suspected intervention by the Ministry of Finance in the wake of Wednesday's Federal Reserve decision.

USD/JPY was trading 0.28% lower at 155.32 on Thursday after slumping more than 2% to reach 153.08 overnight when a further suspected intervention exacerbated the widespread dollar sell-off that followed Wednesday's Fed decision.

The pair fell from 157.58 around the New York close in the second suspected intervention so far this week as the market reacted to dovish commentary from Chairman Jerome Powell in the Fed's press conference.

While Japan's government will disclose any intervention at the end of May, the price action, regardless, "indicates the BOJ stepped-in to the tune of roughly (Yen)5 trillion," said Elias Haddad, a senior markets strategist at Brown Brothers Harriman.

This week's suspected interventions have forced USD/JPY back from a 34-year high of 160 on Monday but the Fed decision might have more impact on the outlook for the yen than anything the Ministry of Finance does.

This is after the Fed's Powell said that fresh or further increases in US interest rates are unlikely and outlined two scenarios in which the Federal Funds rate could still be cut within the year.

He also said the Fed's new higher-for-longer policy stance has already been priced in by financial markets, suggesting current expectations for only one rate cut this year would be about right if inflation lags in returning to the 2% target.

"I think there are other paths that the economy could take which would cause us to want to consider rate cuts. One of those paths would be that we do gain greater confidence," Powell said. "If inflation is moving sustainably down to 2%. Another path could be an unexpected weakening in the labor market, for example."

Wednesday's remarks followed a Federal Open Market Committee decision to hold the Fed Funds rate at its current level - at a range between 5.25% and 5.5% - until policymakers can be confident that inflation is returning sustainably to the target.

An inflation metric that removes volatile food and energy prices stood at 2.8% in March, versus the year earlier 4.8% in March 2023.

So far the comments have halted a multi-month rally in US government bond yields and the dollar, which could help to put a more durable floor underneath the Japanese yen.

The yawning gap between US and Japanese bond yields has been a prominent driver of the rally in USD/JPY this year and ever since the Fed began raising rates in March 2022. USD/JPY has risen more than 35% since then.