The Japanese yen strengthened to around 158 per dollar on Friday, rebounding after nearly touching the 160 level earlier in the week. The move was supported by the Bank of Japan’s continued tilt toward tighter monetary policy as it seeks to counter inflationary pressures stemming from surging oil prices tied to the conflict in the Middle East.
On Thursday, the BOJ left its policy rate unchanged at 0.75%, as widely expected. However, board member Hajime Takata dissented for a second consecutive meeting, advocating a 25 basis point increase to 1% in light of mounting inflation risks. BOJ Governor Kazuo Ueda also signaled that further rate hikes remain on the table if the economic slowdown triggered by the Iran-related tensions proves temporary and underlying inflation persists.
The yen received additional support from a pullback in oil prices after US President Donald Trump ruled out sending ground troops to the Middle East, and Israeli Prime Minister Benjamin Netanyahu vowed to avoid further strikes on Iranian energy infrastructure.
