Yen declines amid concerns over Iran war escalation

The Japanese yen fell in Asian trading on Monday against a basket of major and minor currencies, resuming its losses against the US dollar and approaching the ¥160 threshold. This decline comes as investors focus on buying the US dollar as a preferred safe-haven asset amid escalating fears of the Iran war intensifying, as markets await the final deadline set by US President Donald Trump to reopen the Strait of Hormuz.

With inflationary pressures easing for policymakers at the Bank of Japan, the probability of a Japanese interest rate hike in April has declined, as investors wait for further economic data from Japan.

Price Overview

Japanese yen exchange rate today: the US dollar rose 0.2% against the yen to ¥159.83 from Friday’s closing price of ¥159.51, after hitting a session low of ¥159.47.

The yen ended Friday’s session up less than 0.1% against the dollar, marking its first gain in three days amid fresh warnings from the Japanese Finance Minister regarding excessive currency movements in the foreign exchange market.

Supported by continuous warnings from Japanese monetary authorities, the yen gained 0.45% against the dollar last week, marking its second weekly gain in three weeks.

US dollar

The dollar index rose more than 0.1% on Monday, maintaining gains for the third consecutive session and reflecting the continued strength of the US currency against a basket of global currencies.

The rally is driven by investors focusing on the US dollar as a preferred safe-haven asset amid rising fears of the Iran war escalating, especially following the recent threats from US President Donald Trump.

Iran war updates

• Trump vows that Iran will face "hell" by Tuesday if the deadline to open the Strait of Hormuz is not met.

• Axios: Iranian mediators are making last-ditch efforts to reach a 45-day ceasefire.

• Axios: Sources report that the chances of reaching a partial agreement within the next 48 hours are slim.

Japanese authorities

Japanese Finance Minister Satsuki Katayama issued a new warning to currency traders on Friday, confirming the government's readiness to act against speculation in the foreign exchange markets given the significant rise in volatility recently.

Katayama said during a regular press conference that there is a rise in speculation in both the crude oil futures and foreign exchange markets, and that volatility has increased significantly.

Katayama added that since exchange rate fluctuations resulting from these developments affect the livelihoods and economy of citizens, the government is fully prepared for a comprehensive response on all levels.

Japanese interest rates

Data released last week in Japan showed a slowdown in Tokyo core inflation during March, the latest indicator of easing inflationary pressures on Bank of Japan policymakers.

Following this data, the market pricing for the probability of the Bank of Japan raising interest rates by a quarter point at the April meeting fell from 25% to 15%.

To reassess these probabilities, investors are awaiting the release of more data on inflation, unemployment, and wages in Japan.