Yen Falls Amid BoJ Policy Uncertainty

(RTTNews) - The Japanese yen weakened against other major currencies in the Asian session on Friday, as the market investors expect the Bank of Japan (BoJ) to maintain stable interest rates for an extended length of time in the midst of Middle East crises involving the United States (US), Israel, and Iran.

Despite a long-term commitment to rate normalization, BoJ Governor Kazuo Ueda signaled a possible "prolonged hold" on interest rates due to economic uncertainties brought on by the Middle East conflict.

Traders remain concerned about the economic impact of the expanding conflict in the Middle East, with crude oil prices spiking to above $81 a barrel amid ongoing supply disruption. Strength among energy stocks helped limit the downside for the broader markets.

Iran has claimed it struck a U.S. oil tanker in the northern Persian Gulf, raising fears of a wider conflict after the Islamic republic threatened to halt shipping through the vital Strait of Hormuz.

U.S. Defense Secretary Pete Hegseth has also signaled a possible longer time frame for the conflict than has previously been floated by the Trump administration, saying the war could last up to eight weeks but might be over sooner.

BoJ Governor Kazuo Ueda issued a warning on Wednesday that Japan's terms of trade would deteriorate as a result of increased oil prices brought on by the Iranian crisis, placing "downward pressure on its economy and prompting the underlying inflation."

In order to meet the sustainable BoJ's price target, Ueda emphasized the importance of supporting wage growth.

Traders anticipate the release of Japan's GDP report for the fourth quarter (Q4) in next week. In the Asian trading today, the yen fell to a 2-day low of 183.26 against the euro, from yesterday's closing value of 182.94. The yen is likely to find support around the 184.00 region.

Against the pound, the U.S. dollar and the Swiss franc, the yen dropped to 3-day lows of 210.92, 157.90 and 202.17 from Thursday's closing quotes of 210.51, 157.59 and 201.80, respectively. If the yen extends its downtrend, it is likely to find support around 214.00 against the pound, 158.00 against the greenback and 204.00 against the franc.

Against Australia, the New Zealand and the Canadian dollars, the yen slipped to 111.11, 93.26 and 115.57 from yesterday's closing quotes of 110.44, 92.91 and 115.24, respectively. On the downside, 112.00 against the aussie, 94.00 against the kiwi and 117.00 against the loonie are seen as the next support levels for the yen.

Looking ahead, Eurostat is slated to issue euro area GDP data for the fourth quarter at 5:00 am ET in the European session. The initial estimate showed that the currency bloc expanded 0.3 percent sequentially, the same rate of growth as seen in the third quarter.

In the New York session, U.S. retail sales for January, jobs data for February, used car prices for February, business inventories for December, U.S. Baker Hughes oil rig count for January, U.S. consumer credit change for January and Canada Ivey PMI for February are slated for release.