Yen Edges Lower Ahead of BOJ

The Japanese yen slid to around 157 per dollar on Monday, reversing gains from the previous week as the dollar strengthened on safe-haven demand after President Donald Trump rejected Iran’s response to his peace proposal, dimming hopes for an imminent end to the 10-week conflict. Reports also indicated that Iran had proposed transferring part of its highly enriched uranium stockpile to a third country, while refusing to dismantle its nuclear facilities. Oil prices jumped, heightening inflation concerns and weighing on oil-importing economies such as Japan. Meanwhile, traders remain on alert after multiple rounds of suspected intervention by Japanese authorities starting April 30, which reportedly totaled about 10 trillion yen. While Tokyo has not confirmed intervention, top currency diplomat Atsishu Minura said officials are prepared to respond on all fronts to speculative moves, noting that the IMF places no strict limits on the frequency of intervention.

The Japanese yen traded near 157 per dollar on Friday and was set to end the week little changed, as intervention fears and fresh verbal warnings from Tokyo failed to sustain the recent rally. Japan’s top currency diplomat said on Thursday that the country has no limits on how frequently it can intervene in currency markets and maintains daily communication with US authorities. The yen had initially surged on April 30 amid suspected intervention, with another bout of movement seen on May 6, although the Ministry of Finance has not confirmed any official action in the foreign exchange market. Meanwhile, data showed that Japan’s real wages rose for a third consecutive month in March, reinforcing expectations that the Bank of Japan could continue tightening policy. On the external front, the yen faced renewed pressure from a stronger US dollar as clashes between the US and Iran in the Strait of Hormuz kept geopolitical tensions elevated.

The Japanese yen traded around 156 per dollar on Thursday after rising about 1% overnight, in moves markets largely attributed to suspected intervention from Tokyo. The Ministry of Finance has not confirmed any official action in the foreign exchange market, though Finance Minister Satsuki Katayama recently warned of “decisive measures” against speculative trading, keeping authorities on high alert during the Golden Week holidays. The yen had initially surged as much as 3% on April 30 ahead of the holiday period, before easing back amid a lack of sustained policy follow-through. Externally, the currency also drew support from a weaker US dollar, as expectations of a potential US-Iran agreement to end the war reduced safe-haven demand for the greenback. At the same time, a sharp drop in oil prices helped ease inflation concerns, lowering expectations that the US Federal Reserve would need to adopt a more restrictive interest rate stance.