Yen Slides Toward 40-Year Low as Iran Strikes Lift the Dollar

The Japanese yen slid toward 162.5 per US dollar, hovering near its weakest level in four decades, as renewed conflict in the Middle East drove investors into the safe-haven dollar. Fresh US air strikes on Iran, launched in response to attacks on ships transiting the Strait of Hormuz, pushed oil prices higher and reignited inflation concerns, adding pressure on Japan's economy given its heavy reliance on imported Middle Eastern energy. Traders continued to bet against the yen amid the absence of intervention by Japanese authorities, even as officials signalled they stand ready to act. Finance Minister Satsuki Katayama reiterated that the government is prepared to step into the foreign-exchange market when necessary and that Tokyo and Washington remain in close contact on currency policy. The yen has also been weighed down by concerns over Japan's fiscal expansion and by expectations that the Bank of Japan, which lifted its policy rate to 1% in June, is still moving too slowly to close the wide interest-rate gap with other major economies.