The yen extends losses against the dollar amid widening US-Japan rate differentials and geopolitical risks in the Middle East.
The USD/JPY pair trades above 162.00, up 0.30% on Monday, nearing a four-decade high as the yen underperforms. A persistent rate gap between Japan and major economies, including the US, fuels carry trade demand, weighing on the yen.
Japan’s reliance on Middle East crude oil, exceeding 90%, amplifies pressure on the yen amid escalating US-Iran tensions. Recent missile strikes and the closure of the Strait of Hormuz have driven oil prices higher, reviving concerns over Japan’s economic strain.
The safe-haven dollar strengthens further as geopolitical risks resurface, supporting the USD/JPY pair. The yen’s decline reflects broader market dynamics, including modest dollar resilience and ongoing carry trade activity.