US-Iran Conflict Keeps Yen Moderate, Focus on BOJ and Intervention
The Japanese yen has tended to hold steady amid escalating tensions between the United States and Iran, but its gains have not completely subsided. This is because the current Middle East conflict has not only boosted interest in safe-haven assets like the yen but also strengthened the US dollar. Reuters reported that Donald Trump's comments lowering hopes for de-escalation briefly boosted the dollar, even against the yen, indicating that the market still views the greenback as a primary safe haven when the conflict escalates.
On the other hand, the yen hasn't fallen further because Tokyo has become more aggressive in signaling protection for its currency. Japanese Finance Minister Satsuki Katayama said the government is ready to act against speculative movements in the foreign exchange market, while Japanese currency officials have also issued stern warnings that decisive action could be taken if volatility persists. This stance has helped contain further selling pressure on the yen.
Japan's domestic fundamentals have also begun to provide additional support. BOJ Governor Kazuo Ueda said exchange rate movements significantly influence growth and prices, leaving room for further interest rate hikes from a weaker yen and rising import costs. Reuters also reported that BOJ officials believe the surge in energy prices stemming from the Iran war could push core inflation higher than before, while the IMF is actually encouraging the BOJ to continue gradually raising interest rates.
Therefore, the yen's "hold steady" condition is more accurately interpreted as the result of a tug-of-war between two major powers. US-Iran tensions have indeed boosted demand for safe-haven assets, which typically supports the yen. However, at the same time, Japan is highly vulnerable to rising energy prices due to its dependence on imports, which actually benefits the dollar and puts pressure on the yen. Expectations of a BOJ interest rate hike and the threat of government intervention have prevented the yen's weakening from escalating wildly, so its movements have tended to be contained amidst the turmoil. This is the conclusion from the latest Reuters report on the dollar, the BOJ, and the stance of Japanese authorities. (Zaf)
Source: Newsmaker.id
