The US dollar against the Japanese yen pulls back from high levels; is a medium-term correction beginning?

Tonghui Finance App News—— The US dollar to Japanese yen is under clear pressure during Wednesday’s Asian session, with the exchange rate falling back to around 158.20, for a daily decline of nearly 0.90%. The core driver behind this pullback is the temporary easing of the situation in the Middle East and a sharp drop in energy prices, which has pushed the Japanese yen significantly higher.

Some foreign exchange analysts said, “The current strength of the yen comes not only from the dollar’s decline, but also from lower oil prices improving Japan’s trade conditions.”

From the market backdrop, the United States announced a pause of its military action against Iran for two weeks and reached initial consensus on the restoration of key energy corridors. The news significantly boosted market risk sentiment, with global equities rising: S&P 500 futures were up about 2.5%. Meanwhile, the US Dollar Index fell to around 99.00, indicating that safe-haven demand has clearly decreased.

The Strait of Hormuz handles about 20% of the world’s seaborne energy transportation. Expectations that it will reopen directly eased market concerns about a supply disruption, which in turn triggered a sharp pullback in crude oil prices. WTI crude oil prices have already fallen to around $95, with a daily drop exceeding 15%.

This change is directly beneficial for the yen. Japan, as an economy with a high dependence on energy imports, means that lower oil prices translate into lower import costs, improving expectations for the trade balance and increasing the appeal of the domestic currency. Therefore, in the current environment, oil prices and the Japanese yen show a fairly clear negative correlation.

Some institutions noted, “At this stage, the decline in oil prices has become an important fundamental factor driving the yen’s strength.”

At the same time, the overall pressure on the dollar also provides additional support for the yen. As market risk appetite recovers, capital flows out of safe-haven assets such as the dollar and into other asset categories, further weighing on the USD/JPY outlook.

Looking ahead, market attention turns to the Federal Reserve meeting minutes that are about to be released. The minutes will provide key clues about the policy path, especially as energy prices experience extreme volatility. Investors want to understand how the decision-makers assess inflation and the economic outlook. If the minutes release a hawkish signal, they may support the dollar in the near term, thereby limiting yen gains; otherwise, they could further push the exchange rate lower.

From a technical perspective, the daily chart shows signs of USD/JPY pulling back after being at elevated levels, with the overall trend shifting from strong to ranging and somewhat weaker. The current exchange rate has already fallen below the short-term support area, indicating that short-side strength has increased. The 158.00 level is a key support zone; if it is broken further, it may open downside room toward the 156.50 area. The upper resistance is concentrated at the 160.00 whole-number level, which continues to impose a clear cap on prices. In terms of momentum, shorts dominate in the short term but have not yet formed a one-way trend. Observing the 4-hour cycle, the exchange rate shows a ranging and downward structure; if rebounds fail to break above the 160 level, the short-term trend is still likely to remain weak.

Overall, the USD/JPY’s current move is driven by a double force: “the dollar weakening + oil prices falling in favor of the yen,” and the near-term weak bias is fairly clear.

Editor’s Summary

The core of this USD/JPY pullback lies in the reduction of safe-haven demand for the dollar brought by an easing of the situation in the Middle East. At the same time, a sharp drop in oil prices improves expectations for Japan’s economy, driving the yen higher. Structurally, the exchange rate has moved from a one-way rally into a ranging and weak phase. Future direction will depend on two key variables: first, whether oil prices continue to hold at low levels; second, whether the Federal Reserve policy signals change. If oil prices keep falling and policy stays more dovish, the yen may rise further; otherwise, the exchange rate may return to trading within the range.

（责任编辑：王治强 HF013）

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