The US dollar gained sharply against the Japanese yen on Monday, with the USD/JPY pair rising 1% to a session high of ¥147.60, up from an opening of ¥146.67. The surge came in response to escalating geopolitical tensions after US airstrikes on three nuclear sites in Iran over the weekend — signaling Washington’s deepening involvement in the Iran-Israel conflict.
The renewed uncertainty in the Middle East prompted traders to flock to safe-haven assets, with the greenback benefiting from a surge in demand. As the pair rallied, it broke above the 100-day moving average, a signal that mid-term momentum is accelerating. The 200-day moving average has already been surpassed, and traders are now eyeing the 50-day moving average at ¥149.47 as the next technical hurdle.
Markets are now bracing for Iran’s response. While risk sentiment remained surprisingly stable early Monday — with stock futures steady and Bitcoin prices bouncing from weekend lows — comments from Iran’s Supreme Leader Ali Khamenei hinted at continued retaliation. “It must be punished and it is being punished right now,” he posted on X, in his first response since the strikes. Meanwhile, Donald Trump warned that the US is prepared to escalate, declaring, “There will be either peace, or there will be tragedy for Iran far greater than we have witnessed over the last eight days.”
The dollar also strengthened modestly against the euro, with EUR/USD slipping 0.2% to trade near $1.1490, while GBP/USD held flat at around $1.3435 as traders waited for further clarity on global developments.
Looking ahead, investor focus will turn to key US economic events, including Federal Reserve Chair Jerome Powell’s testimony to the Senate on Tuesday and Wednesday. Powell is expected to offer insights on the interest rate outlook, inflation, and the broader economic trajectory. Also on the calendar this week are consumer confidence data, GDP growth figures, and the core PCE index — the Fed’s preferred inflation measure — due Friday.
As global tensions escalate and the economic outlook evolves, currency markets are entering a critical stretch where both geopolitical and macroeconomic factors will be pivotal in shaping direction.
