Yen Soars as Oil Prices Skyrocket Amid Middle East Tensions

The Japanese yen has steadied near its strongest level since February, keeping the dollar on the defensive as traders grapple with oil prices pushing towards $100 per barrel. Brent crude futures rose by over 1.48% to $99.37 per barrel due to escalating tensions in the Middle East, including US forces hitting multiple Iranian oil tankers and Iran targeting a US base in Jordan.

The reaction in the currency market was to push the dollar modestly lower, although some analysts attributed that weakness to the rapid rise of the yen in the past week. The euro was steady at $1.1631, while sterling last bought $1.3546. The dollar index, which measures the US currency against six of its key rivals, was at 98.15, close to its lowest level in almost two weeks.

OCBC strategists said that higher oil and yields may help limit USD downside, but a more decisive move will require confirmation from the upcoming inflation data. The spotlight has been on the yen due to its 4% rise in September, which has shifted the calculus for the popular carry trade.