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GBP/JPY steadies above 216 as Iran risks weigh on yen
The yen trade is influenced by Japan’s high interest-rate gap versus major economies, even as strikes tied to Iran have traders pricing a geopolitical risk premium.
GBP/JPY rebounded slightly after an Asian-session dip into the mid-216.00s on Monday, stalling the pair’s modest pullback from the prior week’s highest level since January 2008, FXStreet said. Spot prices still sit below 217.00, leaving room for caution among traders looking to extend gains.
FXStreet attributed the yen selling pressure to Japan’s persistent interest-rate differential versus other major economies, which keeps the JPY carry trade active. The outlet also pointed to Japan’s heavy reliance on imported oil from the Middle East, with energy supply disruption risks linked to the Strait of Hormuz adding economic concerns.
The currency backdrop includes a fresh escalation in the Middle East, with the US launching major strikes on Iran and Tehran responding with missile attacks on American military bases in the Gulf. The IRGC also fired at a commercial vessel in the Strait of Hormuz and announced closure of the waterway, prompting traders to price in additional geopolitical risk.
On rate expectations, FXStreet said the Bank of Japan raised its policy rate in June to 1.0 percent, while the Bank of England’s base rate is 3.75 percent, leaving a gap of about 275 basis points. It added that expectations for at least one BoE 25-basis-point hike by year-end and easing UK political uncertainty have supported sterling, while the risk of renewed Japanese intervention and the BoJ’s upcoming meeting could limit further yen weakness.