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Japanese Yen hangs near YTD low vs. USD amid Middle East tensions, intervention fears

  • USD/JPY bulls pause for a breather amid fears of JPY intervention, though the downside appears limited.
  • War-driven economic concerns continue to undermine the JPY and lend support to the currency pair.
  • Inflation fears and hawkish Fed bets underpin the USD, further acting as a tailwind for the spot prices.

The USD/JPY pair consolidates around mid-159.00s during the Asian session on Thursday and remains within striking distance of its highest level since July 2024, touched earlier this month.

The Japanese Yen (JPY) continues with its relative underperformance amid concerns that the war-driven surge in energy prices would weigh on Japan’s trade balance and economic outlook. Furthermore, a sustained increase in Oil prices would drive up inflation and create a classic stagflationary environment, complicating the Bank of Japan’s (BoJ) normalization efforts. This, along with the underlying US Dollar (USD) bullish sentiment, acts as a tailwind for the USD/JPY pair.

Iran’s foreign minister said on Wednesday that Tehran is reviewing a US proposal to end the war but has no intention of holding talks to wind down the widening Middle East conflict. Furthermore, the deployment of additional US troops in the region points to the risk of a further escalation of the conflict and overshadows US President Donald Trump’s ceasefire rhetoric. Apart from this, hawkish US Federal Reserve (Fed) expectations benefit the USD and support the USD/JPY pair.

In fact, traders have nearly priced out the possibility of any further rate cuts by the Fed and are rapidly increasing bets for a hike by the end of this year. The hawkish outlook, along with persistent geopolitical uncertainties, continues to underpin the USD’s global reserve currency status and suggests that the path of least resistance for the USD/JPY pair is to the upside. However, intervention fears hold back the JPY bears from placing fresh bets and cap the upside for spot prices.

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GBP/JPY holds above 213.00, eyes monthly high amid bearish JPY sentiment

  • GBP/JPY bulls move to the sidelines as intervention fears offer some support to the JPY.
  • Economic concerns stemming from the Iran war might cap any meaningful JPY move up.
  • The BoE’s hawkish outlook underpins the GBP and backs the case for some upside for the pair.

The GBP/JPY cross holds steady above the 213.00 mark during the Asian session on Thursday and remains close to a one-month peak, retested earlier this week. Moreover, the fundamental backdrop seems tilted in favor of bullish traders and suggests that the path of least resistance for spot prices is to the upside.

Investors remain worried that the war-driven surge in energy prices would weigh on Japan’s economic outlook and drive up inflationary pressures. This increases the risk of a “stagflationary” environment and might complicate the Bank of Japan’s (BoJ) normalization efforts. The outlook, in turn, has been a key factor behind the Japanese Yen’s (JPY) recent underperformance and continues to act as a tailwind for the GBP/JPY cross.

Meanwhile, BoJ Governor Kazuo Ueda said on Tuesday that he expects underlying inflation to accelerate moderately and added that he will guide monetary policy appropriately to stably achieve the inflation target, accompanied by wage gains. The JPY fails to gain any respite from Ueda’s hawkish comments amid economic concerns stemming from the Middle East conflict, though bears seem hesitant on the back of rising intervention fears.

In fact, Japan’s Vice Finance Minister for International Affairs and top foreign exchange official, Atsushi Mimura, said earlier this week that the government might consider taking measures on all fronts in foreign exchange (FX) volatility. Apart from this, the lack of any meaningful buying interest around the British Pound (GBP), amid a bullish US Dollar (USD), contributes to keeping a lid on any meaningful upside for the GBP/JPY cross.

That said, the UK Consumer Price Index (CPI) released on Wednesday reaffirmed the Bank of England’s (BoE) hawkish tilt and could act as a tailwind for the GBP. In fact, the BoE signaled last week a potential interest rate hike as early as April amid inflation fears. This, along with the underlying bearish sentiment surrounding the JPY, validates the near-term positive outlook and backs the case for an extension of over a one-month-old uptrend.

Japanese Yen Price This Month

The table below shows the percentage change of Japanese Yen (JPY) against listed major currencies this month. Japanese Yen was the strongest against the New Zealand Dollar.

USDEURGBPJPYCADAUDNZDCHF
USD2.00%0.94%2.09%1.02%2.29%3.09%2.29%
EUR-2.00%-1.04%0.07%-0.94%0.28%1.05%0.29%
GBP-0.94%1.04%1.15%0.09%1.34%2.12%1.33%
JPY-2.09%-0.07%-1.15%-1.05%0.19%0.97%0.19%
CAD-1.02%0.94%-0.09%1.05%1.25%2.04%1.25%
AUD-2.29%-0.28%-1.34%-0.19%-1.25%0.79%0.00%
NZD-3.09%-1.05%-2.12%-0.97%-2.04%-0.79%-0.78%
CHF-2.29%-0.29%-1.33%-0.19%-1.25%-0.01%0.78%

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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USD/JPY climbs as US Dollar strength outweighs hawkish BoJ, geopolitical risks

  • USD/JPY edges higher, supported by the resilience of the US Dollar amid geopolitical tensions.
  • The Japanese Yen remains under pressure despite a hawkish tone from the Bank of Japan.
  • Markets stay focused on Middle East tensions and their impact on energy prices and safe-haven flows.

USD/JPY trades around 159.00 on Wednesday at the time of writing, up 0.18% on the day. The pair continues to draw support from sustained demand for the US Dollar (USD) in an environment marked by persistent geopolitical uncertainty.

The Japanese Yen (JPY) struggles to attract buyers despite the release of the Bank of Japan (BoJ) meeting minutes, which indicate that policymakers see room for further rate hikes if the economic outlook evolves as expected. This relatively hawkish stance is offset by concerns over the impact of rising energy prices on Japan’s economy, which is heavily reliant on imports. The surge in Oil prices, driven by the Middle East war, is worsening Japan’s terms of trade and adding further pressure on the currency.

At the same time, the US Dollar remains firm, supported by its safe-haven status. Investors remain cautious as they monitor developments in discussions between Washington and Tehran, with ceasefire proposals circulating but no confirmed breakthrough. Recent military developments in the region continue to fuel risk aversion and reinforce flows into the Greenback.

On the monetary policy front, comments from Federal Reserve (Fed) officials, including Michael Barr, suggest that interest rates may need to remain steady for some time due to inflation still running above target. This outlook helps maintain yield differentials in favor of the US Dollar against the Japanese Yen.

Analysts at BNY also highlight that Japanese activity data show signs of improvement, with a rebound in industrial production and exports. However, these positive signals have not been sufficient to support the JPY, as markets remain focused on yield spreads and global risk dynamics.

Meanwhile, Societe Generale economists note that the pair is testing the upper bound of its multi-year range, with the risk of a bullish breakout if levels near 160 are cleared. They point to the potential for a move toward the highs seen in 2024, as the US Dollar continues to hold the upper hand.

Finally, OCBC Bank emphasizes the key role of energy prices in the JPY’s current weakness, while warning that Japanese authorities could intervene in the foreign exchange market if USD/JPY moves sustainably above the 160 threshold. This could limit further upside in the short term, without necessarily altering the broader bullish trend.

US Dollar Price Today

The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the Australian Dollar.

USDEURGBPJPYCADAUDNZDCHF
USD0.21%0.17%0.19%0.14%0.50%0.32%0.34%
EUR-0.21%-0.04%0.02%-0.08%0.29%0.10%0.12%
GBP-0.17%0.04%0.04%-0.02%0.33%0.14%0.17%
JPY-0.19%-0.02%-0.04%-0.06%0.30%0.10%0.13%
CAD-0.14%0.08%0.02%0.06%0.37%0.19%0.20%
AUD-0.50%-0.29%-0.33%-0.30%-0.37%-0.18%-0.17%
NZD-0.32%-0.10%-0.14%-0.10%-0.19%0.18%0.01%
CHF-0.34%-0.12%-0.17%-0.13%-0.20%0.17%-0.01%

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 US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).