Iran's Hormuz Proposal Sparks Brief Yen Spike

The Japanese Yen experienced a spike on Tuesday after reports emerged that Iran was willing to reopen the Strait of Hormuz, but its gain was short-lived as traders returned their focus to interest rate differentials.

A senior Iranian official told Reuters and Kyodo that Iran would reopen the strait within seven days if the US eases military pressure and lifts its blockade of Iranian ports. However, Iranian parliament speaker Mohammad Baqer Qalibaf said Iran would never give in to US pressure, causing traders to treat the offer as a proposal rather than a reopening.

The Yen's gain on the headline lasted about as long as it took traders to look at the rate gap again. A lower Crude Oil price means fewer Yen sold to cover the bill for Japan, which buys almost all of its crude abroad.

New York Fed President Williams speaks on Thursday and Friday, while Cleveland Fed President Hammack also speaks on Thursday and Friday. Philadelphia Fed President Paulson follows on Thursday. Every Fed official who backs another increase adds to the gap without Japan doing anything.