Yen Slides as USD/JPY Nears Two-Year High on Warnings

Yen Weakness Persists as USD/JPY Reclaims Ground
USD/JPY attracted renewed buying at the start of the week, climbing back above the mid-161.00s during the Asian session. The pair remained close to the peak reached last Thursday, which was the highest level since July 2024, and showed little reaction to ongoing speculation about potential intervention by Japanese authorities.

Japan’s Finance Minister Satsuki Katayama reiterated on Monday that officials are prepared to respond to currency movements “at any time as needed.” Even so, the Japanese Yen continued to underperform, pressured by worries that Japan’s economy will stay under strain due to the Middle East conflict and ongoing disruptions to energy supplies through the Strait of Hormuz.

Geopolitical Tensions and Safe-Haven Dynamics
Geopolitical developments in the Middle East remained a key driver for markets. Iran announced that it had closed the Strait of Hormuz again after accusing the US and Israel of violating the ceasefire, stating that the move was in response to continued Israeli strikes in Lebanon. In addition, US President Donald Trump threatened fresh military action against Iran if Hezbollah continued attacks on Israel, highlighting the fragility of the diplomatic process and keeping a geopolitical risk premium in place.

These tensions overshadowed expectations for further tightening by the Bank of Japan and continued to undermine the Japanese Yen. At the same time, they supported demand for the US Dollar as a safe-haven asset, helping to stall the prior session’s pullback from the USD’s highest level since May 2025 and adding further upside momentum to USD/JPY.