Japanese Yen weakens as renewed Middle East tensions lift US Dollar
- USD/JPY trades around 162.55, supported by the US Dollar's rebound.
- Middle East tensions continue to underpin the USD despite diplomatic signals from Washington and Tehran.
- Investors remain focused on the Bank of Japan's policy outlook and the risk of foreign exchange intervention.
USD/JPY trades around 162.55 on Monday at the time of writing, up 0.10% on the day. After an initial pullback in the US Dollar (USD), the pair regains momentum as geopolitical concerns return to the forefront and support the Greenback.
Market sentiment initially improved after comments suggested that diplomacy between Iran and the United States (US) remained possible. Iranian Foreign Ministry spokesperson Esmaeil Baghaei said intermediaries had recently exchanged messages with Tehran and that negotiations with the US could proceed in line with Iran's national interests. Meanwhile, US Secretary of State Marco Rubio said Washington remained open to diplomacy, provided that any agreement reached would be respected by both sides.
Those comments initially weighed on the US Dollar. However, sentiment quickly reversed after Reuters reported that Yemen's Iran-aligned Houthis had announced an immediate naval blockade against Saudi Arabia. The news revived the geopolitical risk premium, allowing the US Dollar to recover its earlier losses while Oil prices rebounded.
The US Dollar Index (DXY), which tracks the Greenback against a basket of six major currencies, therefore trades around 101.00 after rebounding from an intraday low near 100.65.
At the same time, expectations of a hawkish Federal Reserve (Fed) continue to support the US Dollar. Several Fed officials have recently reiterated their commitment to bringing inflation back to the 2% target, while higher Oil prices continue to fuel inflation risks. Markets are now pricing in at least one additional interest rate hike this year.
On the Japanese side, investors remain cautious over the possibility of foreign exchange intervention by the authorities. Finance Minister Satsuki Katayama reiterated that the government stands ready to take "decisive action at any time" to counter excessive moves in the Japanese Yen (JPY).
Meanwhile, expectations surrounding the Bank of Japan (BoJ) remain tilted toward further policy normalization. According to a Kyodo report, the central bank is expected to leave its policy rate unchanged at 1% at next week's meeting while continuing to signal that additional rate hikes will be needed in the near term. BBH also argued that stronger inflation in Japan and a policy rate that remains near the lower end of the BoJ's estimated neutral range could lead markets to price in further monetary tightening, a factor that could support the Japanese Yen over the medium term.
Japanese Yen Price Today
The table below shows the percentage change of Japanese Yen (JPY) against listed major currencies today. Japanese Yen was the strongest against the Swiss Franc.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.25% | 0.25% | 0.11% | 0.27% | -0.28% | -0.04% | 0.38% | |
| EUR | -0.25% | 0.02% | -0.15% | 0.00% | -0.53% | -0.32% | 0.12% | |
| GBP | -0.25% | -0.02% | -0.17% | -0.01% | -0.56% | -0.33% | 0.08% | |
| JPY | -0.11% | 0.15% | 0.17% | 0.18% | -0.37% | -0.11% | 0.26% | |
| CAD | -0.27% | 0.00% | 0.01% | -0.18% | -0.54% | -0.28% | 0.09% | |
| AUD | 0.28% | 0.53% | 0.56% | 0.37% | 0.54% | 0.25% | 0.67% | |
| NZD | 0.04% | 0.32% | 0.33% | 0.11% | 0.28% | -0.25% | 0.39% | |
| CHF | -0.38% | -0.12% | -0.08% | -0.26% | -0.09% | -0.67% | -0.39% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Japanese Yen from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent JPY (base)/USD (quote).
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