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Yen strengthens while USD/JPY stays subdued after US-Iran strike pause

USD/JPY traded near 163.60 in Asia as lower oil prices supported the yen, even as traders weighed renewed supply risks in the Red Sea.

Reported · Written up by our desk · Major Pairs

USD/JPY stayed subdued for a second straight day in Asian trading on Monday, holding around 163.60 as the Japanese yen found support from falling oil prices. FXStreet linked the move to the US decision to refrain from striking Iran over the weekend, followed by Tehran suspending retaliatory strikes.

Japan’s sensitivity to crude price swings reflects its heavy reliance on Middle Eastern oil imports, a dynamic that can amplify moves in the yen when oil supply expectations change. FXStreet also tied the broader dollar weakness to a reduction in risk aversion after the brief US-Iran pause.

The outlook for the pair remains cautious, however, as market participants monitor potential supply disruptions. FXStreet cited claims by Iran-backed Houthis in Yemen of attacks on Saudi facilities along the Red Sea, and it also noted reports that the US halted strikes amid concerns about depleting interceptor supplies and limited remaining targets within Iran.

On the policy calendar, FXStreet said the Fed is widely expected to hold interest rates steady on Wednesday before resuming rate hikes in September, while the Bank of Japan is expected to hold rates on Friday. The report added that yen moves are heavily influenced by the BoJ’s policy and the gap in Japanese and US bond yields, alongside broader risk sentiment among traders.

Latest closeWTI crude $90.47 ▼1.9%|USD/JPY 163.79 ▲0.4%

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