Japanese Yen Falls to Crucial 160 Level Amid Renewed Gulf Tensions
Market Reactions and Currency Movements
By Rae Wee
Yen Weakness Driven by Dollar Strength and Gulf Tensions
SINGAPORE, June 3 (Reuters) - Persistent strength in the dollar sent the Japanese yen sliding to the key 160 level on Wednesday, as hostilities in the Gulf erupted anew and bolstered demand for the safe-haven U.S. currency.
The U.S. Central Command said Iran launched ballistic missiles toward regional neighbours but all failed to hit targets, and that U.S. forces conducted strikes on Qeshm Island in response to attempted attacks by Tehran.
The renewed strikes occurred as diplomatic talks between Iran and the United States remain at a stalemate, keeping the market mood sombre and the dollar on the front foot.
Japanese Authorities Monitor Yen Movements
The yen weakened to the closely watched 160 per dollar level, where authorities have previously intervened, in early Asia trade on Wednesday. That erased its gains made in the wake of Tokyo's 11.7 trillion yen ($73.14 billion) intervention a month ago to shore up the ailing currency.
The dollar was last 0.04% higher at 159.98 yen.
Expert Commentary on Yen Outlook
"Upward pressure on crude oil prices is making it easier for yen-selling pressure to build," said Hirofumi Suzuki, chief FX strategist at SMBC.
"My view is that the 'line in the sand' is probably not a precise level, but the 160-161 area (for dollar/yen) is likely being watched," he said, referring to the likelihood of further intervention.
Japanese Finance Minister Satsuki Katayama said on Wednesday that the authorities are standing ready to respond appropriately on foreign exchange.
Broader Currency and Market Developments
In the broader market, trading in currencies remained in tight ranges.
The euro eased 0.09% to $1.1621, while sterling was down 0.07% at $1.3455.
Euro Zone and Central Bank Policy Expectations
Data on Tuesday showed euro zone inflation accelerated further last month, driven by energy and services, bolstering the already strong case for a European Central Bank rate hike later this month.
The prolonged war in the Middle East and persistently high energy prices have left investors ramping up bets of policy tightening across major central banks this year, a sea change from the rate cuts that were priced in prior to the conflict.
Against a basket of currencies, the dollar was steady at 99.28, having risen slightly overnight.
U.S. Economic Data and Federal Reserve Outlook
Data on Tuesday showed U.S. job openings increased by the most in five years in April, though the surge likely overstates the labour market's health. Figures on private payrolls are due later in the day, ahead of the key nonfarm payrolls release on Friday.
"The U.S. labour market is improving after weakness in 2025. Combined with high inflation, we expect the Federal Reserve to begin an interest rate tightening cycle in December 2026," said Kristina Clifton, a strategist at Commonwealth Bank of Australia.
Markets are pricing in roughly 18 basis points worth of Fed rate hikes by December.
Other Currency and Crypto Movements
Elsewhere, the Australian dollar fell 0.05% to $0.7177, while the New Zealand dollar dipped 0.03% to $0.5924.
Bitcoin slid to a two-month trough and last traded 0.75% lower at $66,985.26, while ether similarly hit a three-month low and was last at $1,869.33.
(Reporting by Rae Wee; Editing by Jacqueline Wong)
