FX.co ★ Yen Weakens as Dollar Gains on Iran Conflict

The Japanese yen weakened to around 156.5 per dollar on Monday, extending last week’s losses as the greenback advanced following US and Israeli strikes on Iran over the weekend. The attacks killed Iran’s Supreme Leader, Ayatollah Ali Khamenei, and effectively shut the Strait of Hormuz. Tehran responded by targeting US assets across the region, heightening fears of a broader conflict.

The yen also came under pressure from growing uncertainty over the Bank of Japan’s policy outlook. Last week, the Japanese government nominated two reflationist academics to the BOJ’s policy board, while Prime Minister Sanae Takaichi reportedly expressed concern about further interest rate increases in talks with BOJ Governor Kazuo Ueda. Central bank officials pushed back, however, keeping the option of a near-term rate hike on the table.

At the same time, Finance Minister Satsuki Katayama said authorities are watching the yen’s slide “with a strong sense of urgency” and remain in close contact with their US counterparts.