Forex

USD/JPY hits 20-month high as the US dollar remains the preferred safe haven

Nikos Tzabouras Written by Nikos Tzabouras

USD/JPY Analysis

The US-Iran conflict continues as both sides strike a defiant tone, dousing hopes for a quick conclusion. President Trump has demanded unconditional surrender [1], while Iranian officials have dismissed prospects for negotiations and the new Supreme Leader insisted the Strait of Hormuz must remain closed. [2]

Shipping through this crucial oil transit corridor remains effectively shut, oil facilities and tankers are being targeted and some regional producers are cutting output as storage fills up. These supply disruptions are tightening the market and pushing oil prices higher, sparking stagflation risks and a flight to safety among investors. The USDOLLAR has emerged as the safe haven of choice during this turbulent period, outshining XAU/USD and the yen, which has failed to benefit from risk aversion.

Japan is a net importer of crude, sourcing most of its supply from the Middle East [3], so higher energy prices could hurt an already fragile economy. This may embolden PM Takaichi to deliver more forceful fiscal stimulus and exacerbate concerns over public finances that have weighed on the yen.

Growth risks could also prevent the Bank of Japan from hiking rates further, depriving the yen of a tailwind, while reflation fears could prompt a hawkish shift at its US counterpart. Both the BoJ and the Fed announce their rate decisions next week, amid a wave of central bank decisions against a volatile external environment that could shape monetary policy and the trajectory of major currencies.

These forces send USD/JPY to its highest level in nearly two years and create scope for further gains toward its multi-decade peak. On the other hand, the Relative Strength Index (RSI) has not followed USD/JPY higher, a divergence that could lead to pullbacks.

Despite economic headwinds, the spike in energy prices could also put upward pressure on already elevated inflation, just as wages are expected to remain high. As a result, the Bank of Japan is unlikely to deviate from its tightening path. Moreover, Japanese officials stand ready to intervene to stem yen weakness and volatility, with Finance Minister Katayama reiterating prospects of such action today. [4]

Meanwhile, the International Energy Agency has announced the release of 400 million barrels of oil [5] and the United States has lifted sanctions on Russian oil [6], measures that could offer near-term relief and help contain prices. President Trump has also suggested the military campaign could be over very soon. [7]

Nikos Tzabouras

Senior Financial Editorial Writer

Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. With extensive experience in market analysis and a strong foundation in international relations, he brings a unique perspective to financial markets. Nikos emphasizes not only technical analysis but also on fundamentals and the growing influence of geopolitics on financial trends.

As a Senior Financial Editorial Writer, he delivers comprehensive and forward-looking insights across a wide range of asset classes, including equities, commodities, and currencies. His work explores how macroeconomic events, political developments, and global policies impact market dynamics, providing readers with a deeper understanding of both short-term movements and long-term trends.

References

1

Retrieved 13 Mar 2026 https://truthsocial.com/@realDonaldTrump/posts/116182551337254643

2

Retrieved 13 Mar 2026 https://en.khamenei.ir/news/149404

3

Retrieved 13 Mar 2026 https://www.jetro.go.jp/biznews/2026/02/1963e21719ed7c58.html

4

Retrieved 13 Mar 2026 https://www.reuters.com/world/asia-pacific/japan-ready-act-against-sharp-yen-swings-finance-minister-says-2026-03-13/

5

Retrieved 13 Mar 2026 https://x.com/IEA/status/2031742194441203815

6

Retrieved 13 Mar 2026 https://x.com/SecScottBessent/status/2032240591442960393

7

Retrieved 01 May 2026 https://www.youtube.com/watch

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