Key Moments
- USD/JPY extended its advance for a sixth straight session, reaching a two-and-a-half-week high above 159.00 in Asian trading.
- The US Dollar Index climbed to its highest level since April 7 amid rising US-Iran tensions and expectations of a more hawkish Federal Reserve.
- JPY weakened despite intervention concerns, as investors focused on economic risks from the Middle East conflict and higher energy prices.
Dollar Rally Drives USD/JPY Higher
The USD/JPY pair continued its recent uptrend during the Asian session on Monday, advancing for a sixth consecutive day and logging gains in seven of the last eight sessions. The move carried the pair to a two-and-a-half-week peak, with spot levels pushing decisively above the 159.00 handle. The advance has been underpinned by broad-based US Dollar strength.
The US Dollar Index (DXY), which measures the Greenback against a selection of major currencies, moved up to its strongest level since April 7. The latest leg higher followed a combination of rising geopolitical tensions and growing expectations that the US Federal Reserve may adopt a more hawkish policy stance.
Geopolitical Tensions Bolster the Greenback
Escalating friction between the United States and Iran remained in focus. US President Donald Trump warned Iran that the “clock is ticking” and that there “won’t be anything left” if action is not taken soon, adding that “time is of the essence.” In parallel, the Times of Israel reported on Saturday that Israel and the US are actively advancing military preparations to potentially resume coordinated attacks against Iran.
These developments have kept a geopolitical risk premium embedded in markets and continued to support demand for the US Dollar as a reserve currency.
Oil, Inflation Fears, and Fed Expectations
The US-Iran impasse, together with the effective closure of the strategically important Strait of Hormuz, pushed Crude Oil prices to a two-week high. The rise in energy prices has revived concerns that war-related supply disruptions could intensify inflationary pressures.
Against this backdrop, market participants increasingly anticipate that the Federal Reserve may need to lean more firmly toward tightening. Data from the CME Group’s FedWatch Tool indicated that traders are now assigning more than a 50% probability to at least one interest rate increase by the end of this year. The prospect of higher borrowing costs is supportive of elevated US Treasury yields, which in turn has added further backing to the Greenback and the positive tone in USD/JPY.
JPY Pressured by Economic Risk, Intervention Fears Cap Losses
The Japanese Yen has been weighed down by worries over potential economic fallout from the Middle East conflict. Higher energy prices and increased global uncertainty have dented the currency’s appeal, contributing to its recent underperformance against the US Dollar.
At the same time, speculation that Japanese authorities could intervene again to support the Yen has limited the aggressiveness of bearish positioning. These intervention concerns act as a counterbalance to USD strength and could restrict the pace of further upside in USD/JPY. With no significant market-moving economic data releases on the calendar, many traders remain cautious about initiating fresh directional bets at current levels.
JPY Performance Against Major Currencies
Over the last seven days, the Japanese Yen has shown varying performance across major currency pairs. According to the data, the Yen was strongest against the British Pound.
| Base \ Quote | USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF |
|---|---|---|---|---|---|---|---|---|
| USD | – | 1.12% | 1.79% | 1.49% | 0.54% | 1.32% | 1.78% | 1.16% |
| EUR | -1.12% | – | 0.65% | 0.42% | -0.59% | 0.19% | 0.65% | 0.03% |
| GBP | -1.79% | -0.65% | – | -0.74% | -1.26% | -0.48% | -0.00% | -0.62% |
| JPY | -1.49% | -0.42% | 0.74% | – | -0.99% | -0.18% | 0.28% | -0.29% |
| CAD | -0.54% | 0.59% | 1.26% | 0.99% | – | 0.86% | 1.28% | 0.61% |
| AUD | -1.32% | -0.19% | 0.48% | 0.18% | -0.86% | – | 0.46% | -0.15% |
| NZD | -1.78% | -0.65% | 0.00% | -0.28% | -1.28% | -0.46% | – | -0.61% |
| CHF | -1.16% | -0.03% | 0.62% | 0.29% | -0.61% | 0.15% | 0.61% | – |
The heat map above reflects percentage changes of major currencies relative to one another. The base currency is shown in the left-hand column, while the quote currency appears in the top row. For instance, selecting the Japanese Yen on the left and moving horizontally to the US Dollar cell provides the percentage change for JPY (base)/USD (quote).
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