USD/JPY: Yen selling risk persists amid Middle East tensions
Week in review
The USD/JPY opened the week at 156.63. The US military offensive against Iran that began on 28 February prompted dollar buying early on 2 March, and the USD/JPY climbed intermittently to above 157.50 as oil prices rose. Inflation concerns pushed back expectations for US rate cuts and supported continued dollar strength, lifting the USD/JPY to this week's high of 157.97 on 3 March. The pair failed to break past 158 and then moved gradually lower to 156.46 during Tokyo trading on 6 March after US President Donald Trump talked about providing military escorts for tankers in the Strait of Hormuz and media reports suggested Iran had approached the US about ceasefire talks. However, the USD/JPY rebounded to above 157.50 later the same day amid a continued rise in oil prices. Reports that the US Treasury was considering measures to contain oil prices capped gains somewhat, and the USD/JPY was trading around 157.50 at the time of writing on 6 March (Figure 1). The dollar strengthened across the board against G10 currencies this week amid heightened tensions in the Middle East. The euro was particularly weak as markets weighed its potential exposure to the situation (Figure 2).
FIGURE 1: USD/JPY
Note: As at 11:00 JST on 6 March
Source: EBS, Refinitiv, MUFG
FIGURE 2: MAJOR CURRENCIES' RATE OF CHANGE VS USD THIS WEEK
Note: As at 11:00 JST on 6 March
Source: Bloomberg, MUFG