Yen Rises as Oil, Dollar Retreat

The Japanese yen strengthened toward 159 per dollar on Tuesday, ending a three-day losing streak as both the dollar and oil prices retreated on rising expectations that a US-Iran agreement could eventually be reached. President Donald Trump said Tehran had reached out to Washington just hours after the US imposed a naval blockade on Iranian oil shipments in the Strait of Hormuz. Iranian President Masoud Pezeshkian also stated that Iran is prepared to continue peace talks, provided they remain within the framework of international law. The yen additionally drew support from intervention concerns as it neared the key 160 per dollar threshold, a level that previously triggered Japanese authorities to step in to stabilize the currency. Meanwhile, Bank of Japan Governor Kazuo Ueda emphasized on Monday the need to remain alert to the economic fallout from the Iran conflict, warning that higher oil prices could weigh on Japan’s growth outlook.

The Japanese yen depreciated past 159.5 per dollar on Monday, sliding for the third straight session as oil prices surged again after the US and Iran failed to reach a deal during peace negotiations in Islamabad over the weekend. President Donald Trump also announced plans to blockade the Strait of Hormuz and is reportedly weighing resuming strikes on Iran, threatening to escalate the global energy crisis. The protracted conflict narrows the Bank of Japan’s scope for a near-term rate hike as policymakers are divided between those who focus on mounting inflationary risks and those who are concerned about downside risks to growth. The central bank will hold a policy meeting on April 27-28. Meanwhile, Economy Minister Ryosei Akazawa noted that BOJ monetary policy could be used as a tool to curb inflation by supporting a stronger yen. The currency is now hovering near the key 160 per dollar level, which previously triggered intervention by authorities in July 2024.

The Japanese yen steadied around 159 per dollar on Friday, drawing some support as a two-week US-Iran ceasefire triggered a sharp decline in oil prices and eased stagflation concerns. Investors are now focused on diplomatic talks in Islamabad this weekend, where Vice President JD Vance will lead a US delegation in meetings with Iranian officials. However, sentiment remained cautious amid Israeli strikes on Lebanon and ongoing disruptions in the Strait of Hormuz that risk undermining the fragile truce. The yen remains down about 2% since the start of the conflict, reflecting concerns that surging energy costs from the Iran war could fuel inflation while weighing on Japan’s growth outlook. Markets are now watching for signals from Bank of Japan Governor Kazuo Ueda ahead of the April 28 policy decision, following his guidance-style communication approach seen ahead of the last rate hike in December.