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

As tensions in the Middle East intensify, the depreciation of the yen is accelerating. Fearing that rising crude oil prices will lead to a widening trade deficit for Japan, the phenomenon of “buying yen when trouble occurs” has disappeared. Market focus is on the scenario of “yen depreciation like in 2022” caused by Russia’s invasion of Ukraine. Increasingly, opinions suggest that buying the US dollar in extraordinary times and rising energy prices will speed up the sell-off of the yen.

“Amid concerns that oil prices are rising due to the blockade of the Strait of Hormuz, there is no atmosphere of actively buying yen,” explained a foreign exchange broker at a domestic Japanese bank about the mood in the FX market after the beginning of this week.

On March 3, in the London foreign exchange market, the yen against the US dollar once depreciated to around 157.90 yen per dollar, reaching the lowest level since February 9. It closed near 156 yen over the weekend. The yen against the Swiss franc fell to around 203 yen per Swiss franc, the lowest level in two days, and against the Australian dollar, it also dropped to a new low since 1990, reaching 1,990 yen.

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