USD/JPY holds near 159.50 despite a weaker USD, as rising crude prices and Treasury yields weigh on Japan’s import-dependent economy.
The Japanese Yen underperformed other major currencies Monday, with USD/JPY trading near 159.50 for a modest 10-pip gain. While the Dollar Index fell below its 200-day EMA to its weakest level since June, the Yen failed to capitalize, contrasting with the Euro and Pound’s multi-month highs.
The divergence stemmed from geopolitical tensions, as a 60-day framework to ease the Strait of Hormuz dispute expired without resolution. Iran’s aggressive posture sent crude oil up roughly 3%, while the 30-year Treasury yield hit 5.31%, its highest since June 2007. For Japan, which imports nearly all its oil, the combination translates directly into higher costs.
Despite the pressure, overnight swaps price an 80% chance of a Bank of Japan rate hike next month. The central bank’s June increase to 1.00% and a dissenting call for further tightening suggest policy support remains in play, though officials have not intervened to stem the Yen’s decline.