Yen Tumbles as Middle East Tensions Drive Crude Prices Higher

The yen weakened against the dollar in early Tokyo trading on September 1, with the dollar-yen pair reaching 159.79-80 yen by 8:30 a.m. JST.

This decline comes as escalating tensions between U.S. forces and Iran fueled uncertainty over the Middle East, lifting crude oil futures to above $86 per barrel in early Asian hours on September 1, up from $85.76 at settlement on August 31.

The expectation is that higher crude prices will push up Japan's import costs, widening its trade deficit, and prompting yen selling.

Market participants note that caution over potential currency intervention by the Japanese government and the Bank of Japan (BOJ) supports the yen on the downside.