Japanese Yen struggles near 161.50 amid strained US-Iran peace talks

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The Japanese Yen (JPY) is facing fresh headwinds and looking to resume its downside against the US Dollar (USD) as a new week kicks off in Asia on Monday.

The Japanese Yen remains vulnerable near two-year lows early Monday.
The US Dollar catches fresh haven demand on renewed Iran threat.
All eyes remain on the US-Iran geopolitical situation and potential Japanese intervention.

The Japanese Yen (JPY) is facing fresh headwinds and looking to resume its downside against the US Dollar (USD) as a new week kicks off in Asia on Monday.

The USD is finding fresh safe-haven bids, following the strained peace talks between the United States (US) and Iran over the weekend, which resulted in the Iranian negotiators walking out in protest to US President Donald Trump’s threats to strike Iran again.

Trump threatened after Iran announced the closure of the Strait of Hormuz on Saturday, in the wake of the continued Israeli hostilities in Lebanon.

Trump said: "Iran must immediately stop their highly paid PROXIES in Lebanon from causing trouble. If they don't, we'll hit Iran very hard again, just like we did last week, only harder!!!"

Fox News reported that Trump had gone further in an interview, saying he had told Iranian officials if they closed the strait, "you won't have a country", and threatening to take over the waterway.

The Greenback’s renewed haven demand is driving the USD/JPY pair back toward the highest level since July 2024, near 161.80, hit last week.

However, the further upside in the pair remains at the mercy of the looming Japanese forex intervention risks, which could provide a floor to the JPY, especially after the recent hawkish Bank of Japan (BoJ) commentary and signals from the April meeting Minutes.

Japanese Yen FAQs

What key factors drive the Japanese Yen?

The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.

How do the decisions of the Bank of Japan impact the Japanese Yen?

One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The BoJ ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to an increasing policy divergence between the Bank of Japan and other main central banks. More recently, the gradually unwinding of this ultra-loose policy has given some support to the Yen.

How does the differential between Japanese and US bond yields impact the Japanese Yen?

Over the last decade, the BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supported a widening of the differential between the 10-year US and Japanese bonds, which favored the US Dollar against the Japanese Yen. The BoJ decision in 2024 to gradually abandon the ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing this differential.

How does broader risk sentiment impact the Japanese Yen?

The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.