Yen extends losses to four-week trough on mounting US-Iran tensions

The Japanese yen declined in Asian trading on Thursday against a basket of major and minor currencies, deepening its losses for the third consecutive session against the US dollar and hitting its weakest level in four weeks, amid rising demand for the US currency as a safe haven due to escalating military tensions between the United States and Iran, raising fears that the ongoing peace negotiations in Doha could stall or collapse.

As the yen continues to weaken, it is nearing the loss of trading above the ¥160 threshold, which is considered a key level for intervention by Japanese monetary authorities to support the local currency and curb excessive movements in the foreign exchange market.

Price Overview

• Japanese yen exchange rate today: The dollar rose against the yen by 0.1% to ¥159.65, the highest level since April 29, from today’s opening level at ¥159.50, and recorded a low of ¥159.42.

• The yen ended Wednesday’s trading down 0.15% against the dollar, marking its second consecutive daily loss, following hawkish comments from several Federal Reserve officials.

US dollar

The dollar index jumped more than 0.3% on Thursday, extending gains for the third consecutive session and recording a seven-week high at 99.54 points, reflecting broad strength in the US currency against a basket of global currencies.

The rally comes amid investor risk aversion and growing demand for the US dollar as the preferred safe-haven investment, due to escalating military tensions between the United States and Iran in the Strait of Hormuz, threatening the collapse of the peace negotiations in Doha.

Global oil prices

Global oil prices rose more than 3% on Thursday after the US military carried out new strikes targeting military sites inside Iran, prompting Iran’s Revolutionary Guard to suspend the passage of oil tankers through the Strait of Hormuz.

Latest developments in the Iranian war

• The United States launched new strikes on Iran targeting a military site and missile launch platforms.

• A US official said the American military carried out strikes on an Iranian military site that posed a threat to US forces and navigation in Hormuz.

• The US official described the military operation as calculated and defensive.

• Iran’s Revolutionary Guard said it targeted a US base that served as a launch point for attacks near Bandar Abbas.

• Iranian television reported that four vessels were forced to turn back after attempting to cross the Strait of Hormuz without coordination with Iranian forces.

• Tasnim News Agency said a US tanker attempting to cross the Strait of Hormuz was forced to stop and turn back.

• Kuwait’s General Staff activated air defense systems after detecting and intercepting hostile missile and drone attacks in the region.

• The escalation of these violations could trigger a severe diplomatic crisis threatening the collapse of the ongoing negotiations in Doha.

• US President Donald Trump rejected Iranian reports claiming an agreement exists.

• Iranian media reported that the agreement would restore shipping traffic through the Strait of Hormuz.

• Trump denied the existence of any agreement regarding the Strait of Hormuz with Iran and Oman.

• Iran insists on easing economic sanctions and preserving its nuclear rights, while the two sides remain far apart.

• The US Treasury Department imposed sanctions on the Iranian authority established to manage shipping traffic through the strait.

The ¥160 threshold

Japanese authorities are closely monitoring movements in the local currency in the foreign exchange market, particularly as the yen weakens toward the critical ¥160 per dollar level, which has been viewed as a threshold that could prompt renewed market intervention.

Sources told Reuters that Tokyo intervened several times in late April and early May to halt the yen’s decline, although the currency’s recovery did not last long. At the time, the exchange rate reached ¥159.25 per US dollar, its weakest level since April 30.

Outlook for the Japanese yen

• Tony Sycamore, market analyst at IG, said previous intervention by the Bank of Japan had provided policymakers with some relief, but questions remain about its long-term effectiveness.

• Sycamore added: “The key question is whether that intervention was worthwhile for what was essentially only a temporary one-month reprieve. Moreover, will authorities have the capacity to provide similar financial support if the ¥160 level is breached again in coming sessions?”