Why hasn't the Japanese yen been bought amid the tense situation in the Middle East?

As tensions in the Middle East escalate, the depreciation of the Japanese yen is intensifying. Concerns over rising crude oil prices leading to a widening trade deficit in Japan have caused the once common phenomenon of “buying yen during times of trouble” to disappear. Market focus is now on the “2022-style yen depreciation” caused by Russia’s invasion of Ukraine. Increasingly, opinions suggest that buying dollars and rising energy prices during extraordinary times will accelerate the selling of the yen.

“With the blockade of the Strait of Hormuz leading to concerns about rising oil prices, there is no active atmosphere for buying yen,” explained a foreign exchange broker at a domestic Japanese bank about the market sentiment after early this week.

On March 3rd, in the London foreign exchange market, the yen against the dollar temporarily depreciated to around 157.90 yen per dollar, reaching the lowest level since February 9th. It closed last weekend around 156 yen. The yen against the Swiss franc also depreciated to a low of about 203 yen per Swiss franc on the 2nd, and on the 3rd, it fell to a new low since 1990 against the Australian dollar.

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