Yen's Resilience Stuns Markets as Geopolitics Trump Economic Data

The USD/JPY pair has been trading near 159.30 for several days, with the yen seemingly unaffected by its weakness against the dollar.

Despite a decline in the U.S. Dollar Index, which briefly touched its lowest level since June, the yen did not experience any upward momentum.

Geopolitics rather than economic data drove market dynamics on Monday, with tensions in the Strait of Hormuz leading to increased oil prices and rising long-term U.S. Treasury yields.

Japan's dependence on overseas energy and high reliance on crude oil imports means that soaring oil prices will push up imported inflation and financing costs, squeezing corporate profits and burdening households.

All conditions favorable for the yen are in place, with a 25-basis-point rate hike expected next month following a Bank of Japan policy decision to raise interest rates in June and keep them steady at its July meeting.