In early trading in Tokyo on the 14th, the yen fell to the high ¥159 range against the dollar and the high ¥183 range against the euro. The widening US-Japan interest rate differential and heightened tensions in the Middle East weighed on the yen, while higher crude oil prices also had an impact.
In early trading in Tokyo's foreign exchange market on the 14th, the yen weakened against the dollar to ¥159.47–49 per dollar, down 11 sen from the previous day, while the dollar strengthened. Yen selling and dollar buying prevailed amid views that the US-Japan interest rate differential would remain wide, while persistently high crude oil prices also weighed on the yen. The yen also fell against the euro to ¥183.90–93 per euro. The euro edged higher against the dollar.
Views on the direction of the US-Japan interest rate differential remain mixed, with expectations of an early rate hike by the Bank of Japan and expectations of a rate hike in the United States both in play. While concern about possible intervention has spread among investors, the yen's downside probing was reportedly limited.
Worsening conditions in the Middle East were also seen as a factor behind yen selling, with Yemen's Houthis reportedly carrying out a drone attack on a Saudi oil refinery. Difficulties in US-Italian talks on the Middle East also formed part of the backdrop, while persistently high crude oil prices are squeezing Japan's terms of trade.
The ECB's rate hike decision, by 0.25 percentage points, and the Bank of Japan's policy change have been cited as factors influencing the euro's movements. The ECB proceeded with its first rate hike in 2 years and 9 months, while the Bank of Japan is said to have raised its policy rate from 0.75% to 1.0% in June. As a result, the Japan-Europe interest rate differential may not widen in a one-sided manner, and the direction of the euro-yen exchange rate is being assessed cautiously.