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

As tensions in the Middle East escalate, the yen is depreciating further. Concerns over rising crude oil prices leading to a widening trade deficit in Japan have caused the once common phenomenon of “buying yen during crises” to disappear. Market focus has shifted to the “2022-style yen depreciation” triggered 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 causing oil prices to rise, there is no active atmosphere for buying yen,” explained a foreign exchange broker at a domestic Japanese bank about the market sentiment after the beginning of this week.

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

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