[Forex] The reason why the yen's depreciation has rebounded from 148 yen | Yoshida Tsune's Forex Daily | Moneyクリ MoneyX Securities' investment information and media useful for money

Rising Crude Oil Prices Linked to Yen Depreciation = Possible Reaction to the Risk of Closure of the Strait of Hormuz

The rise of the US dollar and the depreciation of the yen, which began after the Israeli airstrike on Iran on June 13, reached 148 yen by June 23 due to US military intervention. This movement deviated significantly from the US-Japan interest rate differential (US dollar advantage, yen disadvantage) (see Chart 1). The US dollar appreciation and yen depreciation, which could not be explained by this interest rate differential, were generally explained as "buying US dollars in times of emergency."

[Figure 1] USD/JPY and the difference in 2-year bond yields between the U.S. and Japan (from April 2025) Source: Created by Monex Securities from Refinitiv data Nevertheless, what exactly does "emergency" refer to in this case? The high value of the US dollar and the depreciation of the yen at this stage had a certain correlation with the soaring crude oil prices (see Chart 2). So, why did crude oil prices soar? One possible reason is that the United States, now the world's largest oil producer due to the emergence of shale oil, is in the most advantageous position against the risk of oil supply being cut off due to the blockade of the Strait of Hormuz. In that sense, it is clearly a reason to buy US dollars. Of course, it is also a reason to sell yen for Japan, which has a high dependency on oil imports.

[Figure 2] USD/JPY and WTI (May 2025 onwards) Source: Created by Monex Securities from data provided by Refinitiv.

The world's largest oil producer, the United States, has become the production adjustment role = changes in crude oil prices due to the Middle East crisis.

In light of the U.S. military intervention, attention has turned to the possibility that Iran will finally move to blockade the Strait of Hormuz. However, as the perception that this will not be exercised strengthens, crude oil prices have plummeted, and it appears that the USD/JPY has also followed suit with a weaker dollar and stronger yen. Considering this, the "emergency" that was referred to as "buying dollars in times of crisis" might be attributed to the significant risk of oil supply disruption due to the blockade of the Strait of Hormuz.

Another point of attention this time is that President Trump strongly urged an increase in shale oil production to prevent and correct the soaring oil prices. The United States, which has become the world's largest oil producer, seems to be beginning to play the role of a swing producer that adjusts oil supply and demand and exerts influence on price stabilization. This could mean that soaring oil prices are less likely to occur even amidst tensions in the Middle East, reducing the possibility of a stronger US dollar and a weaker yen through higher oil prices.

The Reason Why the Yen's Decline Stopped at 148 Yen = Relationship with the Yen Selling Position Breakeven Point

The background of the widening of the dollar's strength and yen's weakness, which deviates from the Japan-U.S. interest rate differential, includes the impact of speculative players' record significant selling positions of dollars and buying positions of yen (buying dollars and selling yen). The CFTC (Commodity Futures Trading Commission) statistics show that speculative players' yen positions briefly reached a record high of over 170,000 contracts net long (net short on dollars) (see Chart 3). Such an unusually excessive buying situation of the yen may have prompted a correction amid concerns over crude oil supply, leading to yen selling that caused the yen to weaken, deviating from the interest rate differential.

[Figure 3] CFTC Statistics of Speculative Yen Positions (2005 onwards) Source: Created by Monex Securities from Refinitiv data The breakeven point for this speculative investor's long position in US dollars and short position in yen was likely around the 148 yen range. This is because the typical hedge funds of speculative investors consider the 120-day moving average (MA) over the past six months as a benchmark for the breakeven point, which was just above the 148 yen range at that time (see Chart 4).

[Chart 4] USD/JPY and 120-day MA (January 2022 - ) Source: Created by Monex Securities from data provided by Refinitiv. Looking at it this way, it can be said that this time's rise in the US dollar and the fall in the yen reversed just before the breakeven point for the speculative positions of selling US dollars and buying yen. If the rise in the US dollar and fall in the yen progresses further and concerns about the expansion of losses in yen buying positions spread, the unwinding of positions ( buying US dollars and selling yen ) could have potentially expanded even more. In that sense, the fact that it did not reach the breakeven point could be said to be a significant factor in the US dollar's rise and the yen's fall circulating around 148 yen, followed by a sharp reversal.