The US Dollar was largely unchanged on Tuesday as investors assessed developments in the Iran conflict, while the Yen held steady in subdued trading following suspected intervention by Tokyo last week that had triggered a sharp rally.
Uncertainty over a ceasefire in the Middle East resurfaced after renewed US and Iranian strikes, as both sides sought influence over the Strait of Hormuz. This came amid conflicting reports about vessel movements through the key shipping route in recent days.
The Dollar index, which tracks the US currency against six major peers, remained stable at 98.44 after gaining 0.3% on Monday. Meanwhile, the Euro traded at $1.1691 and Sterling was last seen at $1.3538, Reuters reports.
Elsewhere, the Australian Dollar edged lower after the central bank, in line with expectations, raised interest rates for a third consecutive meeting in an effort to curb inflation. It was last trading at $0.7154, down 0.18% on the day.
At the same time, the central bank significantly lifted its inflation projections while cutting forecasts for economic growth and employment, citing pressures from the global energy shock.
Furthermore, the Yen traded at 157.19 per US Dollar, close to its strongest level in two months after a series of sharp gains since Thursday. Those moves followed reports that Japanese authorities had intervened in the currency market to slow a steep decline.
Last week’s data suggested Tokyo may have spent around $35 billion to support the Yen, though analysts believe such measures are unlikely to provide lasting relief for the struggling currency.
The Yen has remained weak for years, weighed down by Japan’s ultra-low interest rates and a widening gap with higher-yielding developed economies, alongside growing fiscal concerns. The recent war-driven energy shock has further intensified downward pressure.
A brief surge in the Yen on Monday fuelled speculation that Japan may have intervened again in currency markets, particularly after officials had warned last week of potential action during the Golden Week holidays.
In the near term, USD/JPY is expected to remain volatile within a broader 155-160 range, with authorities likely focusing on preventing a sustained move above 160 rather than attempting to drive a lasting recovery in the Yen.
The outlook for the Yen is also closely linked to movements in oil prices and the pace at which the conflict in the Middle East is resolved. Much depends on oil prices. If they rise or remain elevated, the Yen could come under renewed pressure.