The Japanese finance minister said that due to the ongoing tensions in the Middle East, the yen’s exchange rate against the US dollar is approaching a critical threshold, and the authorities are prepared to take bold measures if necessary to deal with fluctuations in the foreign exchange market.
“We are closely monitoring the situation with an extremely urgent attitude and are ready to take decisive measures at any time if necessary. This is our position on the matter,” Mayu Katayama said in the Diet on Monday. “Decisive measures” in the context of Japanese policymakers refer to market intervention.
When Katayama made his remarks, the yen was trading near its lowest level of the year against the US dollar, and the market remained volatile due to the ongoing conflicts in the Middle East. Earlier on Monday, the yen had dropped to 159.75 against the US dollar, matching its lowest level of the year.
After Katakura’s speech, the yen strengthened slightly to around 159.30. In 2024, after the yen-dollar exchange rate fell below 160, the authorities intervened on multiple occasions.
Katahira made the above remarks as the US dollar continued to benefit from safe-haven buying, mainly due to the ongoing intensification of geopolitical tensions in the Middle East and strong economic data. The overall strength of the US dollar may undermine the case for unilateral action to support the yen. The movement in the options market indicates that traders are betting on further strengthening of the US dollar against a basket of major currencies.
This week, the currency pair will face another crucial test as both the Federal Reserve and the Bank of Japan are set to announce their policy decisions. The market widely expects the Bank of Japan to keep its policy unchanged on March 19th, but more than one-third of the economists surveyed believe that an interest rate hike in April is more likely.
The Federal Reserve is also expected to keep interest rates unchanged this week, with economists forecasting two rate cuts by the end of the year.
Regarding the situation in the Middle East, Katayama added that when the finance ministers of the Group of Seven met last week to discuss the developments in the region, they all expressed concern over the extreme volatility in the markets, including the foreign exchange market.
Japanese Prime Minister Sanae Takaichi said in a speech to the Diet on Monday that Japan will continue diplomatic engagement with Iran. She also said she hopes to discuss how to quickly end the conflict in the Middle East when she meets with US President Donald Trump in Washington on Thursday.
Technical analysis:
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Gold: After the sweep through the yellow alert zone we flagged last Friday, the price rebounded to around 5130. Subsequently, it dropped again and is now consolidating near 5000. In the early Asian session on Monday, the price has been holding steady above the demand zone of 4970/90. Only if it breaks above the consolidation range can we start considering a short-term long signal. For detailed positions, please consult the plugin.
(Gold 15-minute chart)
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The Nasdaq: The price has continued the recent downward channel trend. After sweeping through the liquidity, it has started to rebound and correct. If it recovers to 24,500 within the day, a rebound to the 24,650/24,700 area can be expected. For detailed positions, please consult the plugin.
(NASDAQ 15-minute chart)
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Crude oil: After opening at a high of around 102, it has continuously declined, filling the gap left by the opening. Geopolitical situation is currently the biggest driving factor. If the current situation remains unchanged, the main fluctuation range may be between 95 and 105; if the situation gradually cools down, the fluctuation range may be between 85 and 95; if the situation heats up rapidly, the price will test the 105-115 range. In terms of operation, it is recommended to try to observe the long position signals at the bottom of the above-mentioned several ranges for participation. For detailed positions, please consult the plugin.
(Crude Oil 15-Minute Chart)
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Toda’s key economic data and events to focus on:
20:30 Canadian February Consumer Price Index
20:30 US March New York Fed Manufacturing Index
21:15 US Industrial Output for February
22:00 US March NAHB Housing Market Index
