The Japanese yen fell in Asian trading on Tuesday against a basket of major and minor currencies, resuming its losses against the US dollar as demand returned for the US currency as a preferred safe-haven asset, especially after the United States and Israel launched airstrikes on Iranian energy infrastructure.

Targeting Iranian energy facilities has significantly complicated the diplomatic landscape, as observers believe these strikes undermine already fragile bridges of trust and make it difficult for Tehran to return to the negotiating table under direct military pressure.

The yen is also under pressure from data showing a slowdown in core inflation in Japan in February, indicating easing inflationary pressures on Bank of Japan policymakers and reducing the likelihood of a rate hike in April.

Price Overview

Japanese yen exchange rate today: the US dollar rose 0.25% against the yen to 158.79, up from the session opening level of 158.41, with a session low of 158.26.

The yen ended Mondays session up 0.5% against the dollar, benefiting from a decline in the US currency after Donald Trump announced talks with Iran and delayed any military strikes on Iranian energy facilities for five days.

US dollar

The dollar index rose on Tuesday, beginning to recover from a two-week low, reflecting a renewed rise in the US currency against a basket of global currencies.

The index fell on Monday to its lowest level in two weeks after US President Donald Trump postponed strikes on Irans electricity grid, a move that eased concerns about a prolonged war in the Middle East.

Trump wrote on his Truth Social platform that the United States and Iran had held very good and productive talks on a comprehensive and final resolution to hostilities in the Middle East.

Trump added: I have instructed the Department of War to delay all military strikes on Iranian energy facilities and infrastructure for five days.

According to Iranian news agencies, Iranian officials denied holding any talks with the United States, with some describing such reports as false and aimed only at calming markets.

Contrary to expectations, US and Israeli air forces launched intense strikes on some energy facilities in Iran on Tuesday, a move likely to escalate military confrontations and prompt Irans Revolutionary Guard to carry out missile attacks on energy facilities in Israel and Gulf countries.

Core inflation

Data released in Tokyo on Tuesday showed Japans core consumer price index rose 1.6% in February, the slowest pace since March 2022, below market expectations of a 1.7% increase, after rising 2.0% in January.

These figures confirm the continued easing of inflationary pressures on Bank of Japan policymakers, reducing the likelihood of interest rate hikes in the first half of the year.

Japanese interest rates

Following the above data, markets reduced pricing for the probability of a quarter-point rate hike by the Bank of Japan at the April meeting from 30% to 15%.

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