The Japanese Yen (JPY) and Canadian Dollar (CAD) both responded to sharp moves in oil prices following diplomatic developments between the United States and Iran regarding the reopening of the Strait of Hormuz. The Yen recovered early losses and turned slightly positive against the US Dollar (USD), with the USD/JPY pair dropping 0.2% to near 157.00 during the European session on Thursday [1]. This rebound was attributed to a significant correction in oil prices, driven by hopes that Iran could reopen the Strait of Hormuz—a critical chokepoint for nearly 20% of global energy supply—within seven days if the US takes initial steps to ease military pressure, according to a senior Iranian official cited by KyodoNews [1][2].
Similarly, the Canadian Dollar traded flat against the US Dollar, with the USD/CAD pair at 1.4035, as the risk appetite from Tehran’s proposal offset the decline in crude prices [2]. The news of potential negotiations was further supported by US President Donald Trump’s willingness to meet Iranian President Masoud Pezeshkian at the UN General Assembly, raising hopes for a negotiated end to the conflict that has lasted nearly seven months [2].
The drop in oil prices also weakened the US Dollar’s safe-haven appeal, with the US Dollar Index (DXY) retreating from a 52-day high of 100.67 earlier in the day [1]. For Japan, lower oil prices are seen as positive due to its reliance on energy imports [1]. On the monetary policy front, the Bank of Japan (BoJ) is expected to deliver more interest rate hikes this year, having already raised rates twice. MUFG analysts described the BoJ’s recent moves as the start of a 'new phase' with a potential rate hike every three months, even as external factors like higher US yields and energy prices continue to pressure the Yen [1].
Technical analysis for USD/JPY shows the pair trading at 156.96, above the 20-period EMA at 156.63, with the RSI at 49.57 indicating balanced momentum [1]. For USD/CAD, the near-term bullish trend remains intact, with resistance at 1.4050 and potential targets up to 1.4135, while support lies at 1.4000 and 1.3930 [2]. The CAD was the strongest against the Australian Dollar among major currencies today [2].
CONCLUSION
Diplomatic progress between the US and Iran over the Strait of Hormuz has triggered a sharp correction in oil prices, benefiting the Japanese Yen and keeping the Canadian Dollar steady despite falling crude. The market is watching for further developments in US-Iran talks and upcoming central bank decisions, with technical indicators suggesting potential for continued volatility in both USD/JPY and USD/CAD pairs.