Japanese yen Holds Steady as Dollar Gains on Safe-Haven Demand
The Japanese yen remained stable on Tuesday, following recent volatility sparked by suspected intervention from Tokyo authorities. At the same time, the U.S. dollar strengthened, supported by safe-haven demand as geopolitical tensions in the Middle East continued to weigh on investor sentiment.
Australian Dollar Steady Ahead of Reserve Bank of Australia Decision
The Australian dollar traded largely unchanged at $0.7168, as markets awaited the Reserve Bank of Australia’s policy announcement. The central bank is widely expected to deliver a third consecutive rate hike in an effort to control persistent inflation.
Investors are closely watching the RBA’s tone and forward guidance for clues on the future path of interest rates. Inflation has remained above the bank’s 2%–3% target range since mid-2025, prompting tightening measures since early February.
Strait of Hormuz Crisis Fuels Global Inflation Concerns
Rising inflation fears globally have been amplified by the closure of the Strait of Hormuz, a critical route responsible for around 20% of global oil shipments. The disruption has triggered an energy shock, keeping crude oil prices above $100 per barrel since the conflict began.
Fresh clashes between the United States and Iran on Monday further unsettled markets, threatening a fragile ceasefire and keeping risk appetite subdued.
Dollar Strengthens While Euro and Pound Slip
The heightened uncertainty boosted the U.S. dollar, while other major currencies weakened. The euro hovered near $1.1693, maintaining recent losses, and the British pound traded at $1.353.
The U.S. Dollar Index, which tracks the greenback against a basket of six currencies, held steady at 98.452 after gaining 0.3% in the previous session.
Analysts Warn of Further Market Volatility
Market strategists highlighted that while risk aversion has increased, markets have not yet experienced extreme moves typically associated with full-scale escalation.
Analysts caution that any further deterioration in the situation could push oil prices significantly higher and weigh further on risk-sensitive assets.
Traders Monitor Yen After Intervention Signals
The yen traded around 157.22 per dollar, close to its strongest level in two months, after recent gains fueled by suspected intervention from Japanese authorities.
Reports suggest that Tokyo may have spent approximately $35 billion to support the currency, although analysts believe such measures are unlikely to reverse long-term pressures.
Structural Weakness Continues to Weigh on Yen
The yen has faced prolonged weakness due to Japan’s ultra-low interest rates and the widening gap with higher-yielding global markets. Ongoing fiscal concerns and rising energy costs have added to the currency’s challenges.
Analysts at ING Group noted that recent intervention has only temporarily adjusted the dollar-yen trading range without addressing underlying bearish pressures.
Outlook: Yen Likely to Remain Volatile
Market participants expect continued volatility in the USD/JPY pair, with a likely trading range between 155 and 160 in the near term. Authorities are expected to resist a sustained move above the 160 level rather than engineer a long-term reversal.
The yen’s trajectory will largely depend on oil price movements and the progression of the Middle East conflict. Elevated oil prices could place renewed pressure on the currency in the coming weeks.
