As if the yen doesn’t have enough reasons to weaken, risks are emerging that higher oil prices will hit energy import-dependent Japan and its currency.
Crude oil futures jumped on Friday following reports that Israel launched a missile strike on Iran, extending their gain to more than 25% from a December low. The prospects of heightened tensions in the Middle East suggest the rally may have room to run.
That’s bad news for yen bulls: a 10% gain in oil prices will help pull down the currency by ¥3 to ¥4 against the dollar on an annual basis, according to estimates by Yujiro Goto, head of Japan currency strategy at Nomura Securities.
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