The Japanese yen fell in Asian trading on Monday against a basket of major and minor currencies, extending its losses for the second consecutive day against the US dollar and moving lower toward its lowest level in 20 months. The decline comes as investors continue buying the US dollar as a preferred safe-haven asset amid the escalation of the war in the Middle East.

The yens weakness comes under the watch of Japanese authorities, after Japans top currency diplomat stated that the government is ready to take action to address volatility in the domestic currency in the foreign exchange market.

Price Overview

Japanese yen exchange rate today: the US dollar rose 0.25% against the yen to 159.62, up from the session opening level of 159.20, with a session low of 159.01.

The yen ended Fridays session down about 1.0% against the dollar, resuming its losses that had paused the previous day during a recovery from a 20-month low of 159.90.

US dollar

The dollar index rose more than 0.2% on Monday, extending its gains for the second consecutive session, reflecting the continued strength of the US currency against a basket of global currencies.

The rally comes as investors focus on buying the dollar as a preferred safe-haven asset amid the escalation of the war in the Middle East, especially after US President Donald Trump threatened to strike Irans electricity grid if Tehran does not reopen the Strait of Hormuz, while Irans Revolutionary Guard pledged to respond by targeting infrastructure in neighboring Gulf countries.

Israel announced launching large-scale strikes on Iran, while Saudi Arabia reported that the Iranian military fired two ballistic missiles toward Riyadh.

Fatih Birol, Executive Director of the International Energy Agency, warned that the current crisis poses a serious threat to the global economy and is worse than the energy crisis that occurred in the Middle East during the 1970s.

Japanese authorities

Atsuki Mimura, Japans Vice Minister of Finance for International Affairs and top currency diplomat, issued a strong warning on Monday about the current risks in the foreign exchange market resulting from geopolitical turmoil.

Mimura said that the intense speculation currently seen in oil and gas markets due to the Iran war could spill over into the foreign exchange market, leading to irrational fluctuations in the yens exchange rate.

He added that Japanese authorities are closely monitoring currency movements with the highest level of vigilance, stressing that the government will not tolerate excessive speculative moves that do not reflect economic fundamentals.

Japanese interest rates

The Bank of Japan kept interest rates unchanged last week for the second consecutive meeting.

Following the meeting, markets continued to price the probability of a quarter-point rate hike at the April meeting at below 30%.

To reassess these expectations, investors are awaiting further data on inflation, unemployment, and wages in Japan.