FX.co ★ Yen Weakens on Renewed US-Iran Tensions

The Japanese yen weakened toward 159 per dollar on Monday, erasing gains from the previous session as oil prices surged amid escalating US-Iran tensions over the weekend. President Donald Trump stated that the US Navy fired on and seized an Iranian-flagged cargo ship in the Gulf of Oman after it allegedly ignored orders to stop while leaving the Strait of Hormuz. In response, Tehran reversed its plans to reopen the strait after Washington refused to lift its blockade on Iranian ports and declined to join a second round of talks. Oil prices jumped more than 5%, putting additional pressure on the currencies of major oil-importing economies, including Japan. At the same time, investors remain divided over whether the Bank of Japan will raise interest rates later this month, as Governor Kazuo Ueda has refrained from signaling an April move in advance. However, the BOJ is still widely expected to upgrade its inflation projections at this month’s meeting, in line with persistently higher energy costs.