Yen resumes losses as the US launches strikes on Iran

The Japanese yen declined in Asian trading on Tuesday against a basket of major and minor currencies, resuming its losses that were temporarily halted yesterday against the US dollar, and moving back near its lowest levels in three weeks, driven by renewed demand for the US currency as a safe haven, especially after the United States launched defensive attacks on boats and missile sites in Iran.

Sources confirmed that those violations would not affect the course of the advanced peace negotiations between Washington and Tehran, as intensive diplomatic efforts continue to reach a comprehensive agreement that would ensure de-escalation and stability in the Middle East.

Price Overview

• Japanese yen exchange rate today: The dollar rose against the yen by 0.1% to ¥159.00, from today’s opening level at ¥158.88, and recorded a low of ¥158.81.

• The yen ended Monday’s trading up 0.2% against the dollar, marking its first gain in the past three sessions, as part of a recovery from a three-week low at ¥159.34.

• Aside from buying activity from lower levels, the yen recovered amid optimism that the United States and Iran are nearing a peace agreement to end the war in the Middle East.

US dollar

The dollar index rose 0.1% on Tuesday, resuming gains that had paused in the previous session, and moving once again toward its highest level in six weeks, reflecting the rise of the US currency against a basket of global currencies.

Demand for the dollar as a safe haven resumed after new US attacks on Iran increased doubts over the possibility of reaching an agreement to reopen the vital Strait of Hormuz and end the three-month-long Iranian war.

Global oil prices

Global oil prices rebounded by more than 2% on Tuesday, beginning to recover from five-week lows, amid renewed fears that the Strait of Hormuz could remain closed to oil tankers, especially after the US military targeted Iranian boats and missile launch sites.

Latest developments in the Iranian war

• The United States launched defensive strikes on boats and missile sites in Iran.

• US Central Command (CENTCOM) announced that the strikes came after monitoring Iranian movements to deploy boats intended to plant new naval mines in the Strait of Hormuz to threaten shipping, as well as missile sites that could target US warplanes.

• Iranian news agencies acknowledged hearing powerful explosions in Bandar Abbas and coastal areas.

• Iranian authorities confirmed that “the situation is fully under control,” signaling their commitment to the truce despite the US violations.

• The Iranian Foreign Ministry spokesman said that a US-Iran agreement is not imminent.

• An Iranian delegation led by chief negotiator Mohammad Bagher Ghalibaf and Foreign Minister Abbas Araghchi is visiting Doha for further talks regarding the potential peace agreement with the United States.

Additional Japanese budget

Prime Minister Sanae Takaichi announced on Monday that Japan would increase its budget by $19 billion to support fuel prices and help counter rising living costs linked to the consequences of the Iranian war.

Takaichi confirmed that the additional budget would be financed through deficit-covering bonds, but added that she believes the measure can be implemented “without affecting the government bond market.”

Japanese interest rates

• Market pricing for the probability of the Bank of Japan raising interest rates by a quarter percentage point at next June’s meeting is currently stable around 60%.

• Investors are awaiting further data on inflation, unemployment, and wage levels in Japan in order to reassess those probabilities.