Why hasn't the Japanese Yen been bought amid the tense situation in the Middle East?

As tensions in the Middle East escalate, the yen is depreciating further. Concerns over rising crude oil prices leading to a widening trade deficit in Japan have caused the once common phenomenon of “buying yen during crises” to disappear. Market focus is on the “2022-style yen depreciation” triggered by Russia’s invasion of Ukraine. Increasingly, opinions suggest that buying dollars and rising energy prices during extraordinary times will accelerate the selling of the yen.

“With concerns about oil prices rising due to the blockade of the Strait of Hormuz, there is no active atmosphere for buying yen,” explained a foreign exchange broker at a domestic Japanese bank about the market sentiment after early this week.

On March 3rd, in the London foreign exchange market, the yen against the dollar briefly depreciated to around 157.90 yen per dollar, the lowest level since February 9th. It closed last weekend near 156 yen. The yen also depreciated against the Swiss franc to a low of about 203 yen per Swiss franc on the 2nd, and against the Australian dollar, it fell to a 1990s low on the 3rd.

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