USD/JPY eases to 159.40 amid hopes of a peace deal in Iran

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The US Dollar (USD) nudges lower against the Japanese Yen (JPY) on Monday, with trading volumes at low levels as most markets remain closed on Easter Monday. The pair hit session lows at 159.35 on the early European session, as hopes of a peace deal in Iran are putting the US Dollar under pressure.

USD/JPY retreats below 159.40 amid a broad-based weakness of the US Dollar.
Hopes of a ceasefire in Iran are undermining the safe-haven USD.
Fears of a Yen intervention at 160.00 are also keeping Yen sellers in check.

News reporting that the US and Iran have received the framework of a plan to end hostilities by a group of mediators provided a glimpse of hope on Monday. Concerns about US President Donald Trump's threat to destroy civil infrastructure and energy sites if the Strait of Hormuz is not reopened before Tuesday at 8 PM have eased somewhat, prompting investors to scale down US Dollar long positions.

The US Dollar’s downside attempts, however, remain limited with markets still on edge. The war in Iran and the sharp appreciation of Oil prices have kept the Japanese Yen on the back foot. Japan is a major Crude importer, and the current prices pose a significant challenge to the economic outlook, adding strain to the already troubled fiscal stability.

Against this backdrop, the Yen has depreciated bearly 5% since late February, reaching the key 160.00 level last week, which is considered a line in the sand for the Japanese authorities. Japan’s Finance Minister, Satsuki Katayama, supported those views on Friday, observing “very speculative” moves in currency markets and reiterating that Tokyo is ready to take all possible steps to stem Yen weakness.

Furthermore, data from the US released on Friday showed a 178K increase in Nonfarm Payrolls in March, nearly three times the 60K gain expected. Investors, however, took the figures with caution. Accumulative data showed that net employment remains little changed from March 2025, while there are concerns that a protracted war in Iran poses a significant downside risk to employment.

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.

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