Yen Weakens as Geopolitical Risks Regain Strength
The Japanese yen weakened again after US President Donald Trump's latest comments on the Iran war triggered a shift in sentiment in global financial markets. In his speech, Trump said the conflict would "be over soon," but he offered no certainty about the timeline for a ceasefire and instead emphasized that US military operations would continue for the next two to three weeks. This mixed message led the market to further reduce expectations for a rapid de-escalation and boosted demand for the US dollar.
Reuters reported the dollar index rose by about 0.3% to 99.925 after the speech. Simultaneously, the euro and pound each fell by about 0.3%, while risk-sensitive currencies like the Australian dollar and New Zealand dollar also fell by about 0.6%. The yen did weaken, although it remained slightly above the area previously considered vulnerable to Japanese intervention.
For the Japanese market, the current yen's weakness is no longer entirely good news. While a weak yen often helped exporters in the past, the current situation is different because Japan is heavily dependent on energy imports. When the Iran conflict pushed up oil prices and the yen weakened simultaneously, the burden of imported inflation became even heavier. The Japanese government even called recent yen movements "speculative" and reiterated its readiness to respond to any movements deemed excessive.
Pressure on the yen also brought the market back to the spotlight on the Bank of Japan's actions. BOJ Governor Kazuo Ueda previously stated that the central bank monitors exchange rate movements as a factor that could impact the economy and inflation, and left open the possibility that continued yen weakness could be a reason for further policy tightening. This means that even though the yen is weakening, the market must still consider the possibility of a response from the Japanese monetary authorities in the near future.
Overall, the current yen weakening reflects one key factor: the market is not yet fully convinced that the Iran conflict will be resolved soon. As long as Trump's statements continue to open up room for escalation and energy risks remain high, the yen has the potential to remain volatile against the dollar, especially if the market continues to seek assets perceived as safer or more liquid. (Zaf)
Source: Newsmaker.id
