USD/JPY Held, Yen Rebounds Amid Hopes for Middle East Peace
USD/JPY remained a market focus on Wednesday, April 1, 2026, after the yen recovered from its lowest level this year. Reuters reported that the yen briefly rebounded from 160.46 per dollar and moved back below the psychological level of 160, with its last position around 158.73 per dollar. This movement indicates that buying pressure on the dollar is starting to ease somewhat, although the market remains very cautious.
One of the main triggers came from hopes for a easing of conflict in the Middle East. After President Donald Trump stated that US military operations against Iran could end in two to three weeks, the market began to reduce defensive positions in the dollar. This condition also prompted a reversal of the old buy dollar, sell yen trend, although Reuters emphasized that this peaceful sentiment was not yet fully solidified as there were still signs of escalation on the ground.
From Japan's perspective, the yen also received support from growing expectations that the Bank of Japan could raise interest rates again in April. The Tankan survey showed sentiment in large Japanese manufacturers rose to +17 in March, the highest since December 2021, while corporate inflation expectations also increased. The market is even starting to price in a roughly 70% chance of a BOJ interest rate hike this month.
However, the yen's upside is not yet fully open. Reuters assesses that the dollar is still supported by the Federal Reserve's cautious stance on interest rate cuts, while US jobs data later this week could be a key determinant of its next direction. In other words, USD/JPY is currently in a tug-of-war phase, where the dollar remains solidly grounded, but the yen is also gaining strength from BOJ policy expectations.
Causes
1. Hopes for a de-escalation in the Middle East
Trump's comments about the possibility of an end to the war in two to three weeks have reduced demand for the dollar as a safe haven, giving the yen room to recover.
2. Expectations for a BOJ interest rate hike
Stronger Tankan data and rising Japanese corporate inflation expectations increase the likelihood of a BOJ interest rate hike in April, supporting the yen.
Things to Watch
1. US Labor Data and the Fed's Policy Direction
This week's US payrolls report could change market expectations regarding a Fed interest rate cut. If the data is strong, the dollar could strengthen again; if weak, USD/JPY could fall further.
2. Latest BOJ Decisions and Signals
The market is now increasingly sensitive to the possibility of a Japanese interest rate hike. If the BOJ signals a more hawkish stance, the yen could strengthen further. However, with caution, USD/JPY could remain in the upper 150s. (CP)
Source: Newsmaker.id
