JPY falls to 6-week lows versus USD

Today’s headlines

What’s happening: The Japanese yen recorded losses against the US dollar this morning amid surging oil prices.

What happened: Investors remained concerned about the prolonged US-Iran conflict impacting global energy supplies.

Strength in the US dollar also exerted further pressure on the Japanese currency this morning.

Why it matters: The ongoing Middle East conflict raised concerns over oil supplies with Iran’s Islamic Revolutionary Guard Corps (IRGC) declaring the closure of the Strait of Hormuz, through which more than 20% of global oil passed daily.

Attacked by Israel on Iran’s oil facilities over the weekend further stroked fears of a rise in energy prices.

Meanwhile, Iran named Mojtaba Khamenei, son of Ayatollah Ali Khamenei, as the country’s ⁠new Supreme Leader.

Japan is dependent on the Middle East for approximately 95% of its crude oil supplies, of which around 70% passes through the Strait of Hormuz. Volatility on oil supplies is expected to significantly impact Japan going ahead.

The Japanese government is looking to tap oil from its national reserves with no resolution of the US-Iran crisis in sight.

Meanwhile, data released this morning showed Japan’s current account surplus surged to ¥942.6 billion in January from ¥344.6 billion in the year-ago month. However, the figure came in below market estimates of ¥960 billion. The improvement in surplus was largely driven by a lower goods account deficit, which narrowed to ¥600.4 billion from ¥2,934.0 billion in the year-ago month, as exports jumped 20.5% and imports fell 7.7%, signalling resilient external demand.

The value of loans in Japan rose 4.5% year-over-year in February following a previous reading of 4.4%, while overtime pay in Japan surged 3.3% year-over-year in January.

Strength in the US dollar exerted further pressure on the Japanese yen, as the greenback benefited from its safe-haven status and the pulling back of speculations of interest rate cuts by the Federal Reserve this year.

The US dollar index, which measures the greenback’s performance versus a basket of major peers, gained more than 0.6% to 99.62 this morning.

The USD/JPY forex pair rose around 0.6% to 158.72, while the Nikkei 225 tumbled 7.07% to trade at 51,687.97 this morning.

What to watch: Investors will keep an eye on the ongoing attacks on Iran, which is expected to significantly impact the Japanese yen ahead.

Data on household spending (0330 UAE Time), average cash earnings (0330 UAE Time) and GDP growth rate (0350 UAE Time) from Japan will be released today. Household spending in Japan, which fell 2.9% in December, is expected to rise by 0.8% in January. Analysts expect Japan’s nominal wages to surge by 2.5% year-over-year in January from 2.4% in December, while Japan’s economy is expected to expand at an annualised rate of 0.2% in the fourth quarter following a 2.6% contraction in the previous quarter.

The markets today

US stocks in focus today ahead of inflation data

Context: Major US stock indices closed lower on Friday as investors assessed jobs data and a sharp surge in oil ‌prices.

Details: Disappointing jobs data fuelled concerns around the US economy cooling amid rising energy costs due to geopolitical tensions in the Middle East.

Oil prices rose sharply on Friday, following a series of US-Israeli attacks against Iran that led to the closure of the Strait of Hormuz.

Investors also pulled back speculations of the Federal Reserve cutting interest rates anytime soon, stroking concerns around US economic growth.

Data released on Friday showed that the US economy lost 92,000 jobs in February compared to a gain of 126,000 in January. The figure came in much worse than market expectations of 59,000 job adds.

Average hourly earnings surged 0.4% from the previous month to $37.32 in February, slightly higher than market estimates of 0.3%. The US unemployment rate climbed to 4.4% in February from 4.3% in January, moving closer to November’s four-year high of 4.5%.

Meanwhile, US retail sales declined by 0.2% in January, faring slightly better than market estimates of a 0.3% decline. This marked the first contraction since October 2025.

The Dow Jones index lost 453.15 points, or 0.94%, to close at 47,501.55 on Friday. The S&P 500 fell 1.33% to settle at 6,740.02, while the Nasdaq 100 declined 1.51% to 24,643.02.

The Dow recorded its steepest weekly percentage decline since early April 2025, while the
S&P 500 notched its worst week since mid-October.

What to watch: Investors will continue monitoring the ongoing war against Iran.

Data on consumer inflation expectations (1900 UAE Time) will be released today. Median one-year-ahead inflation expectations in the US, which fell to 3.1% in January, recording the lowest level in six months, from 3.4% in December, are projected to remain at 3.1% in February. Data on inflation rate will be released on Wednesday, which is expected to show the annual inflation rate rising to 2.5% in February from 2.4% in January.

Other Markets: European indices closed lower on Friday, with the FTSE 100, DAX 40, CAC 40 and STOXX Europe 600 Index down by 1.24%, 0.94%, 0.65% and 1.02%, respectively.

The news shaping the markets

Russia launched a missile strike at a residential apartment block in Ukraine’s second-biggest city Kharkiv. The news sent the USD/RUB pair lower in forex trading this morning.

China’s annual inflation accelerated to 1.3% in February from 0.2% in the previous month. Inflation climbing to the highest level since January 2023 lent support to the USD/CNY forex pair.

Colombia’s annual inflation rate climbed to 5.29% in February from 5.35% in the previous month. However, the latest reading coming below market estimates of 5.49% sent the USD/COP pair lower in forex trading this morning.

Argentina’s industrial production tumbled 3.2% year-over-year in January, after the previous month’s 3.9% decline, which lent support to the USD/ARS forex pair.

Brazil’s car production jumped 24.9% to 204,300 units in February, compared to a 13.5% decline in January, which sent the USD/BRL pair lower in forex trading this morning.

What else to watch today

Singapore’s foreign exchange reserves (1300 UAE Time), Mexico’s inflation rate (1600 UAE Time), auto exports (1600 UAE Time) and auto production (1600 UAE Time) as well as US 3-month Bill auction (1930 UAE Time) and 6-month Bill auction (1930 UAE Time).