Even as the dollar has had its troubles in the past two weeks, USD/JPY continues to stay underpinned with the yen currency itself also unable to get off the floor.
As the US-Iran conflict drags on and the Strait of Hormuz remains closed, Japan remains one of the biggest losers in all of this. That as the economy relies heavily on oil imports from the Middle East. That’s even leading to a push to release another 20 days’ worth of oil reserves to try and alleviate the pressure on the situation.
The yen has very much lost its allure as a safe haven considering the circumstances, and USD/JPY looks to want to push higher but not for some verbal intervention and warnings from Tokyo still.
MUFG notes that this week’s episode might just be another step closer towards actual intervention though. The firm says that:
“Japan finance minister Katayama highlighted that she told G7 members at yesterday’s meetings that Japan is watching FX with a high sense of urgency. US Treasury Secretary Scott Bessent did not attend the meetings but Katayama stated that she had also discussed FX with him earlier in bilateral talks. It quickly follows on from comments yesterday in which she said that they “definitely need to calm markets” and agreed to stay in close contact with Bessent.
The latest comments indicate a higher risk that Japan is moving closer to intervening directly to support the yen with USD/JPY still threatening to break above the 160.00 level. The yen has continued to underperform even as the US dollar has corrected sharply lower in recent weeks. The yen has been the second worst performing G10 currency since the US-Iran ceasefire was announced on 7th April.”
Even if the dollar is struggling, the yen is also in a very tough spot. I reckon if peace talks break down and the war looks set to extend further for another month or two, that would really put a number on the yen. And if so, that might be the straw that breaks the camel’s back and prompt Tokyo to finally proceed with actual intervention.
So, we’ll see.
This article was written by Justin Low at investinglive.com.
