The yen extended its decline in the Tokyo foreign exchange market, falling to the low ¥155 range per dollar. With higher oil prices pushing up import costs, downward pressure on the yen remains in place.
The yen traded at ¥155.36–38 per dollar on the morning of the 16th, a weak-yen, strong-dollar level 48 sen weaker than at 17:00 the previous day. Following a surge in US crude oil futures, concerns grew that Japan, an energy-importing country, would see its trade balance deteriorate, and yen selling and dollar buying prevailed.
The front-month WTI contract briefly reached $106.75, its highest level in 4 months. It remained around $105 in after-hours trading on the morning of the 16th, and downward pressure on the yen continued amid views that rising oil prices would push up import costs.
In the Tokyo market on the 15th, the dollar ended trading around ¥154.67, meaning the yen weakened by approximately 70 sen in just 1 day. Some also attributed the yen's decline to expectations of demand-driven dollar buying on 5th- and 10th-day settlement dates.
The market sees higher energy import costs resulting from rising oil prices and the widening Japan-US interest-rate differential caused by higher long-term US interest rates as factors driving the yen lower. At the same time, expectations are mixed that higher oil prices could reignite inflation and slow the Federal Reserve's pace of rate cuts.