Dollar Extends Rally, Yen Steadies on Japan Intervention Warnings
The US dollar continued to strengthen against major currencies as rising geopolitical tensions fueled demand for safe-haven assets, though gains in the USD/JPY pair were tempered by renewed warnings of potential intervention from Japanese authorities.
The US Dollar has shown solid performance against most major currencies since early Monday (March 30). The US Dollar Index (DXY) even rose to around 100.50, driven by increased demand for safe haven assets amid ongoing high geopolitical uncertainty.
Escalating tensions in the Middle East remain the primary driver of market sentiment. Iran reportedly rejected a peace proposal from the United States, describing the terms as unrealistic and excessive. At the same time, armed conflict between Iran and Israel has continued, with the involvement of Yemen’s Houthi group contributing to a broader regional escalation.
Now entering its second month, the conflict has reignited concerns about a potential surge in energy prices, particularly crude oil. Markets are increasingly pricing in the risk of higher global inflation, which could erode consumer purchasing power and slow economic growth, especially in countries heavily reliant on energy imports.
Noel Dixon, a strategist at State Street Global Markets, said investor focus is gradually shifting toward growth risks. He noted that regions such as the United Kingdom and the European Union are the most vulnerable.
In foreign exchange markets, downside pressure on major currencies has become more evident. The euro weakened to a one-week low near 1.1450 against the dollar, while the British pound fell to its lowest since December 2025. Commodity-linked currencies also faced headwinds, but USD/CHF rose to its highest level since mid-January 2026.
Meanwhile, USD/JPY is drawing particular attention. This currency pair touched its highest level since July 2024 at 160.46 during the Asian session, before eventually correcting to the 159.50 area. Further weakening of the Yen was held back after Japanese authorities issued a strong warning regarding potential intervention in the foreign exchange market.
Japan's top currency official, Atsushi Mimura, said the government stands ready to take decisive action if speculative movements persist. Bank of Japan Governor Kazuo Ueda echoed that stance, emphasizing that policymakers are closely monitoring exchange rate developments given their significant impact on economic stability and domestic prices.