The Japanese yen fell in Asian markets on Monday against a basket of major and minor currencies, continuing its losses for the second day in a row against the US dollar, moving down to its lowest level in 20 months, due to investors focusing on buying the US currency as the best alternative investment, amid the escalating war in the Middle East.
The yen's decline is being closely watched by Japanese authorities, with Japan's top currency diplomat stating that his government is prepared to take action to counter fluctuations in the local currency in the foreign exchange market.
Price overview
Today's Japanese Yen exchange rate: The dollar rose against the yen by 0.25% to (159.62¥), from today's opening price of (159.20¥), and recorded a low level at (159.01¥).
The yen ended Friday's trading down about 1.0% against the dollar, resuming losses that had paused the previous day as part of a recovery from a 20-month low of 159.90 yen.
US dollar
The dollar index rose more than 0.2% on Monday, extending its gains for the second consecutive session, reflecting the continued rise in the levels of the US currency against a basket of global currencies.
This rise comes amid investors' focus on buying the dollar as the best alternative investment, in light of the escalating war in the Middle East region, especially after US President Donald Trump threatened to strike the Iranian electricity grid if Tehran did not open the Strait of Hormuz, and the Iranian Revolutionary Guard pledged to retaliate by targeting infrastructure in neighboring Gulf states.
Israel announced it had launched large-scale strikes against Iran, while Saudi Arabia announced that the Iranian army had fired two ballistic missiles towards Riyadh.
For his part, the Executive Director of the International Energy Agency, Fatih Birol, warned that the current crisis poses a serious threat to the global economy and is worse than the energy crisis that occurred in the Middle East during the 1970s.
Japanese authorities
Atsuki Mimura, Japan’s Vice Minister of Finance for International Affairs and top currency diplomat, issued a stark warning today about the current risks in the foreign exchange market as a result of geopolitical turmoil.
Mimura said that the intense speculation currently taking place in the oil and gas markets due to the Iranian war could spread to the foreign exchange market, leading to irrational fluctuations in the yen exchange rate.
Mimura added that Japanese authorities are closely and vigilantly monitoring currency movements, stressing that the government will not tolerate any sharp speculative moves that do not reflect economic fundamentals.
Japanese interest rate
The Bank of Japan kept interest rates unchanged last week for the second consecutive meeting.
Following the meeting, the pricing in the probability of the Bank of Japan raising interest rates by a quarter of a percentage point at its next April meeting remained below 30%.
In order to reprice those probabilities, investors are awaiting further data on inflation, unemployment and wage levels in Japan.
