The Japanese yen is on track for its largest single-day decline this month, as a broad sell-off in major currencies was fueled by U.S. economic data that pushed Treasury yields higher, reinforcing expectations that the Federal Reserve will adopt a more gradual approach to interest rate cuts in the coming months.

The yen led losses among G-10 currencies, alongside the New Zealand dollar and the Swedish krona. During afternoon trading in New York, the yen fell as much as 1% against the U.S. dollar, hitting an intraday low of 154.87. The Bloomberg Dollar Index extended its gains, rising 0.5%, while the yield on the 10-year U.S. Treasury note climbed 2 basis points to 4.08%.

The yen faced additional pressure from the latest Fed meeting minutes, which revealed that the Federal Reserve Bank of New York’s trading desk had, on behalf of the U.S. Treasury, inquired about the dollar-yen exchange rate.

"Rising U.S. Treasury yields are putting pressure on the yen," said Shaun Osborne, chief foreign exchange strategist at Scotiabank. "Short-term risks are largely tied to overall market sentiment and how participants assess oil price movements amid ongoing Middle East tensions."

Data released on Tuesday showing strong private-sector employment reinforced the view that the labor market remains robust. A series of solid economic indicators published on Wednesday, including industrial production and business equipment orders, further supported U.S. Treasury yields.

Last month, market speculation grew that Japanese authorities, possibly with rare support from the U.S., were preparing to intervene directly in the currency market to bolster the yen. This expectation peaked on January 24, when the yen surged rapidly during New York trading hours following reports that the New York Fed had made inquiries. Such actions by Japanese officials often precede actual intervention.

The minutes from the January 27–28 Federal Open Market Committee (FOMC) meeting, released on Wednesday, clarified that the New York Fed’s contact with financial institutions in January regarding the yen exchange rate was conducted "entirely" on behalf of the U.S. Treasury.

"In the days leading up to the meeting, the dollar weakened noticeably after reports surfaced that the trading desk had requested indicative quotes for the dollar-yen exchange rate, a practice known as 'checking,'" the minutes stated. "The manager noted that, under the framework in which the New York Fed acts as fiscal agent for the U.S. Treasury, the trading desk made these inquiries solely on behalf of the Treasury."