Yen Holds Steady Amid US-Iran Uncertainty

The Japanese yen steadied near 159 per dollar on Tuesday, moving sideways so far this week as fresh US military operations in southern Iran and ongoing peace negotiations kept investors cautious. The US military reportedly targeted missile launch sites and vessels suspected of attempting to deploy mines in southern Iran, with US Central Command saying the operations were aimed at protecting American troops in the region. Meanwhile, President Donald Trump said talks with Tehran were progressing well, though he warned that additional attacks could follow if negotiations broke down. On the domestic front, data released last week showed Japan’s core inflation rate slowed to a four-year low in April, easing pressure on the Bank of Japan to tighten monetary policy in the near term. Still, the central bank may continue to consider further rate hikes as the Japanese economy remains relatively resilient.

The Japanese yen appreciated past 159 per dollar on Monday, rebounding from three-week lows as declining oil prices and a softer US dollar supported the currency amid signs that the US and Iran were moving closer to a deal that could reopen the Strait of Hormuz. A full reopening of the key shipping route would offer relief to major Asian economies heavily reliant on Middle Eastern oil imports. Meanwhile, data released last week showed Japan’s core inflation rate slowed to a four-year low in April, reducing pressure on the Bank of Japan to tighten monetary policy in the near term. Even so, the central bank could still consider raising rates as Japan’s economy continues to show resilience. Separately, traders remained cautious about the possibility of currency intervention, with the yen still trading near the 160-per-dollar level that reportedly prompted Tokyo’s intervention efforts in late April and early May.

The Japanese yen slipped past 159 per dollar on Friday and was on track for a second consecutive weekly decline, as softer domestic inflation eased pressure on the Bank of Japan to tighten monetary policy in the near term. Japan’s core inflation rate slowed to 1.4% in April from 1.8% in March, marking its lowest level in four years and remaining below the central bank’s 2% target for a third straight month. At its April meeting, the BOJ sharply raised its core inflation forecast to 2.8% from 1.9%, citing elevated crude oil prices tied to the Middle East conflict and continued cost pass-through by businesses to consumers. The latest data also followed reports that PM Sanae Takaichi signaled openness to a supplementary budget aimed at addressing rising energy costs. Meanwhile, traders remained alert for possible currency intervention as the yen continued to trade near the 160-per-dollar level that reportedly triggered Tokyo’s intervention efforts in late April and early May.