The Japanese Yen (JPY) appreciated against the US Dollar (USD), with the USD/JPY pair dropping to near 159.35 during Asian trading hours on Thursday. This movement was attributed to US President Donald Trump's announcement of an extension to the ceasefire with Iran, which weighed on the US Dollar relative to the Yen. Trump stated on Tuesday that the ceasefire would be extended while awaiting a 'unified proposal' from Tehran. Despite the extension, Iran has vowed not to reopen the Strait of Hormuz amid the ongoing US naval blockade. The White House press secretary, Karoline Leavitt, commented that Iran's claim of seizing two ships in the Strait of Hormuz does not constitute a violation of the ceasefire extension [1].
In related geopolitical developments, Lebanon is seeking a one-month extension of its current truce with Israel, with new meetings scheduled in Washington on Thursday. The talks between Lebanon and Israel on April 14 were their first in decades, and the US subsequently announced a 10-day truce, which is set to expire on Sunday [1].
On the monetary policy front, Bank of Japan (BoJ) Governor Kazuo Ueda refrained from signaling an April rate hike, citing significant economic uncertainty stemming from the 'negative supply shock' of the ongoing war. Despite this, financial markets are now pricing in a 72%-77% probability of a BoJ rate increase in May, with expectations for a hike rising to nearly 99% by June, according to Reuters [1].
The market reaction to these developments has been a strengthening of the Yen, as traders adjust their expectations for BoJ policy normalization and respond to shifting geopolitical risks. The preliminary reading of the S&P Global Purchasing Managers Index (PMI) is also anticipated later on Thursday, which may further influence market sentiment [1].
CONCLUSION
The Japanese Yen gained strength following the US extension of the ceasefire with Iran and rising expectations for a Bank of Japan rate hike by June. Market sentiment remains cautious amid ongoing geopolitical tensions and economic uncertainty, with traders closely monitoring upcoming economic data and central bank signals.