Yen Surges Amid Rising Wage Growth and Ongoing Middle East Tensions
The Japanese Yen continued its rally against major currencies on Tuesday, reaching its highest level against the US Dollar since mid-February. The economic calendar is quiet for now, but markets are pricing in an aggressive Bank of Japan policy-tightening cycle, which is boosting the JPY.
Lately, the yen has gained strength due to Japan's real wages increasing by +2.4% year-on-year in July, exceeding expectations and marking the strongest growth since May 2021. This 'stronger-than-expected wage data reinforces the overwhelming case for the Bank of Japan to raise interest rates at next week's policy meeting,' analysts at Deutsche Bank said.
The recent conflict in the Middle East is also driving up crude oil prices, with the barrel of West Texas Intermediate (WTI) trading above $92. There are no signs of de-escalation, and Secretary of Iran's Supreme National Security Council, Mohsen Rezaei, warned that Tehran would respond to what it calls US 'economic warfare' by imposing a maritime exclusion zone across the Persian Gulf.