Japanese Yen gains as easing risk aversion weighs on USD
USD/JPY halts its four-day winning streak, trading around 159.90 during the Asian hours on Thursday. The pair depreciates as the US Dollar (USD) loses ground amid easing risk aversion following the news that Israel and Lebanon on Wednesday agreed to renew a ceasefire. However, it would require a "complete cessation" of fire by Iran-backed Hezbollah. The agreement was announced in a joint statement after US-led talks in Washington.
Israel and Lebanon do not have formal diplomatic relations, though also agreed to establish a number of “pilot security zones" in which the Lebanese armed forces "will take exclusive control of the territory to the exclusion of all non-state actors."
However, the Wall Street Journal reported on Thursday that the US President Trump has told aides that he would consider ending the ceasefire with Iran if Tehran kills US troops. Trump insisted that the week-long pause in airstrikes remains intact despite a steady stream of violent skirmishes. Moreover, Trump said in a New York Post interview that the blockade lasting until Labor Day is unlikely but possible, effectively extending the market's timeline for a Hormuz reopening.
SMBC Nikko strategist Makoto Noji warned on Tuesday that Japan faces a potential "historic Yen collapse" fueled by prolonged oil price volatility and loose fiscal policy. To combat this, Noji urged policymakers to deploy a coordinated, three-pronged strategy of interest rate hikes, a halt to fiscal expansion, and further market interventions, arguing that no single measure can solve the crisis alone.
Meanwhile, Finance Minister Satsuki Katayama declined to comment on specific currency movements or recent intervention data. However, she emphasized that persistent energy market volatility requires Japan to remain prepared for "appropriate action." Katayama framed potential interventions as broader economic management rather than simple exchange-rate defense, adding that Tokyo is closely coordinating and actively monitoring the markets alongside the United States.
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