Asian Currencies Mixed as Yen Hovers Near 160 Amid US-Iran Tensions
Asian currencies traded mixed on Monday as the Japanese yen hovered near the closely watched 160-per-dollar level, while a fresh escalation in the U.S.-Iran conflict drove oil prices higher and reinforced a risk-off mood across regional markets.
The U.S. dollar was broadly firm after Federal Reserve Chair Kevin Warsh's hawkish comments pushed markets to price in a higher chance of a September rate hike, with the implied probability rising to about 57%.
Japanese 10-year government bond yields reached their highest level since 1996, while analysts argued that the Bank of Japan may need a series of rate hikes to support the currency. Nomura's Naka Matsuzawa said that if life insurers begin returning to Japanese bonds in anticipation of a BOJ hike, it could have a significant impact on the USD/JPY pair.
Oil prices surged after U.S. forces struck two Iranian launchers on Larak Island, and Iran retaliated by attacking U.S. forces in Jordan. The focus now shifts to a busy week for central banks and economic data, with New Zealand's central bank expected to raise interest rates for a second straight meeting on Wednesday.