Yen Remains Near 40-Year Low as Middle East Tensions Support the U.S. Dollar

The U.S. dollar strengthened against several Asian currencies on July 8, 2026, as geopolitical developments in the Middle East contributed to demand for the U.S. currency. Market attention also remained focused on differing policy signals from regional central banks.

Following recent U.S. actions involving Iran and changes to Iranian oil export licensing, the U.S. Dollar Index rose to a one-week high. USD/JPY advanced for a fourth consecutive session to around ¥162.46, keeping the exchange rate near multi-decade highs and at levels that continue to attract market attention regarding possible official responses.

Attention also remained on the Bank of Japan's policy outlook. BOJ board member Toichiro Asada stated that he would like to see further evidence of demand-driven inflation before supporting additional policy tightening, indicating policymakers continue to assess economic conditions before considering future adjustments.

In New Zealand, the Reserve Bank of New Zealand raised its official cash rate by 25 basis points to 2.5%, in line with market expectations. The central bank also stated that additional reductions in monetary stimulus could be required, after which the New Zealand dollar strengthened against the U.S. dollar during the session.

Across Southeast Asia, USD/MYR rose 0.3% to 4.08 ahead of Bank Negara Malaysia's policy meeting. According to OCBC, the central bank is widely expected to keep its policy rate unchanged at 2.75%. USD/THB increased 0.2% to 33.39, while USD/TWD gained 0.4% to 32.01. The South Korean won weakened 0.3% to 1,509 after the country's finance ministry said it was closely monitoring market developments.

Investors will also monitor the release of the Federal Reserve's June meeting minutes, China's inflation data, and Bank Negara Malaysia's policy decision. These developments may provide additional information for assessing regional currency movements alongside broader global economic conditions.